Lesson preview · Price Elasticity Of Supply
What Is PES?
~7 min · Free to read
We’ve spent a lot of time on the demand side of elasticity. Now flip to producers. When price changes, how much do suppliers adjust their quantity? That’s Price Elasticity of Supply, or PES.
Key Term
Price Elasticity of Supply (PES)
A measure of how responsive quantity supplied is to a change in price. Because supply curves slope upward, PES is usually positive — no absolute value needed.
Same structure as PED — quantity response over price change.
The intuition: when prices rise, producers want to supply more. But can they? A bakery can bake more loaves quickly. An oil driller needs years to open a new well. A restaurant can’t add a table overnight. These physical and logistical constraints are what PES measures.
Key Term
The Classifications (same as PED)
→ Elastic supply (firms scale up easily) → Inelastic supply (scaling up is hard) → Unit elastic → Perfectly inelastic (vertical supply curve — fixed quantity, like Picasso paintings) → Perfectly elastic (horizontal supply curve)
Trap · Common Misconception
PES vs PED: different actors
PED measures consumer responsiveness. PES measures producer responsiveness. Same formula structure, opposite sides of the market. Don’t mix them up.
Calculating PES. Same procedure as PED. Use the simple formula when given percentages directly, or the midpoint method between two (price, quantity) data points to avoid directional bias.
Midpoint method for PES — same logic as PED.
Check yourself · no marks
If the price of lemonade doubles and producers can instantly double production, is supply elastic or inelastic?
Commit to one first. Guessing and being wrong beats reading the answer cold.
Worked Example
The price of coffee beans rises from 4 dollars/lb to 5 dollars/lb. Supply grows from 10,000 lbs to 13,000 lbs. Calculate PES using the midpoint method.
Practice · 1 / 5
Price elasticity of supply measures how responsive ___ is to a change in price.
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