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Understanding Price Elasticity of Supply: A Comprehensive Guide

Price elasticity of supply (PES) is a crucial concept in economics that measures how responsive the quantity supplied of a good is to changes in its price. This guide will walk you through the basics of PES, how to calculate it using the midpoint method, and the different types of elasticity. Additionally, we'll provide recommendations for practice activities to reinforce your understanding. The Basics of Price Elasticity of Supply Price Elasticity of Supply is defined as the percentage change in quantity supplied divided by the percentage change in price. It indicates how much the supply of a good will increase or decrease in response to a price change. Calculating PES Using the Midpoint Method The midpoint method is a reliable way to calculate price elasticity of supply. Here’s how to do it: Determine the Change in Quantity Supplied : Subtract the initial quantity supplied from the new quantity supplied. Calculate the Midpoint of Quantities : Add the initial and new quantities s...