price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the...
Transcript of price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the...
![Page 1: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/1.jpg)
price elasticity of supply (PES)
![Page 2: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/2.jpg)
price elasticity of supply (PES)
measures the responsiveness of quantity supplied to a
change in price
![Page 3: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/3.jpg)
Explain the concept of ,
understanding that it involves responsiveness of quantity supplied
to a change in price along a given supply curve.
objective
price elasticity of supply
![Page 4: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/4.jpg)
DiagramsPES
![Page 5: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/5.jpg)
Calculate PES using the equation:
%∆#$%∆%$
objective
![Page 6: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/6.jpg)
%∆#$%∆%$
PES
![Page 7: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/7.jpg)
PracticePES
![Page 8: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/8.jpg)
practice PES
Suppose the price of strawberries increases from €3 per kg to €3.50 per kg, and the quantity of strawberries supplied increases from 1000 to 1100 tonnes per season. Calculate PES for strawberries.
![Page 9: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/9.jpg)
practice PES
![Page 10: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/10.jpg)
Explain, using diagrams and PES the concepts of elastic
supply, inelastic supply, unit elastic supply, perfectly elastic supply and
perfectly inelastic supply
objective
VALUES
![Page 11: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/11.jpg)
VALUE PES
![Page 12: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/12.jpg)
VALUE PES
INELASTIC
PES< 1
![Page 13: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/13.jpg)
VALUE PES
ELASTIC
PES > 1
![Page 14: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/14.jpg)
VALUE PES
UNIT ELASTIC
PES = 1
![Page 15: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/15.jpg)
VALUE PES
PERFECTLY INELASTIC
PES = 0
![Page 16: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/16.jpg)
VALUE PES
PERFECTLY ELASTIC
PES =∞
![Page 17: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/17.jpg)
DiagramsPES
![Page 18: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/18.jpg)
Explain the of PES, including time, mobility of factors
of production, unused capacity and ability to store stocks
objective
DETERMINANTS
![Page 19: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/19.jpg)
DETERMINANTS of PES
![Page 20: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/20.jpg)
DETERMINANTS PES
Length of Time
![Page 21: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/21.jpg)
DETERMINANTS PESLENGTH OF TIME
The primary determinant of PES is the amount of time producers have to respond
to a price change
![Page 22: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/22.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
![Page 23: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/23.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
MARKET PERIOD1.
![Page 24: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/24.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
MARKET PERIOD1.
Immediately after a change in price. Supply is highly inelastic, because firms cannot
immediately produce more of a good
![Page 25: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/25.jpg)
Diagrams
market periodPES
![Page 26: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/26.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
SHORT-RUN2.
![Page 27: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/27.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
SHORT-RUN2.
Firms can use their fixed capital more or less intensively, so supply is more slightly
more elastic
![Page 28: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/28.jpg)
Diagrams
short-runPES
![Page 29: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/29.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
LONG-RUN3.
![Page 30: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/30.jpg)
THREE TIME PERIODS HELP DETERMINE PES:
LONG-RUN3.
Firms have time to vary the amount of capital they use, so supply is highly elastic.
In the long-run an increase in price will result in a much greater increase in Qs than
in the market period or the short-run
![Page 31: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/31.jpg)
Diagrams
long-runPES
![Page 32: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/32.jpg)
DETERMINANTS PES
Mobility of Factors of Production
OTHER
![Page 33: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/33.jpg)
DETERMINANTS PESMOBILITY
If resources (land, labor and capital) can be quickly put into or taken out of
the production, supply tends to be more elastic
![Page 34: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/34.jpg)
DETERMINANTS PESMOBILITY
Generally, this applies to low-skilled manufactured goods, the supply of which is
more elastic than high-tech, capital-intensive manufactured goods
![Page 35: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/35.jpg)
DETERMINANTS PES
Ability to Store Stocks
OTHER
![Page 36: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/36.jpg)
DETERMINANTS PESSTORE STOCK?
If large inventories can be kept, producers can respond to price rises by drawing on those inventories to meet rising demand
and to price declines by adding to inventories in response to falling demand
![Page 37: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/37.jpg)
DETERMINANTS PESSTORE STOCK?
Goods which can be stored tend to have more elastic supply than perishable,
non-storable goods
![Page 38: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/38.jpg)
PracticePES
![Page 39: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/39.jpg)
practice PES
Suppose that in response to an increase in the price of good X from $10 to $15 per unit, the quantity of
good X produced:
(a) does not respond at all during the first week, (b) increases from 10,000 units to 12,000 units over five months, and (c) increases from 10, 000 to 18, 000 units over two years. Calculate PES for each of these three time periods
![Page 40: price elasticity of supply - C.JONES ECONOMICS...price elasticity of supply (PES) measures the responsiveness of quantity supplied to a change in price Explain the concept of , understanding](https://reader033.fdocuments.in/reader033/viewer/2022042918/5f5ede2605ba1a50a718bdb4/html5/thumbnails/40.jpg)
practice PES
(d) How can you account for the difference in the size of the three elasticities
(e) Draw a supply curve that is likely to correspond to each of the three elasticities in a single diagram