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Price elasticity of supply (PES) measures how producers are responsive to change in the price of a good.

Definition of PES:

Price elasticity of supply (PES) is defined as:

“A measure of responsiveness of the quantity supplied due to change in price”.

Measurement and Formula for PES:

Price elasticity of supply (PES) is measured by dividing the percentage change in the quantity supplied by the percentage change in the price. Thus the percentage method formula for PES is given below:

Types:

Just like demand, supply have following major types:

Elastic supply or inelastic supply.

Definition of Elastic Supply:

Elasticity of supply represents the extent of change in supply in response to a change in price. If the amount supplied is highly responsive to a change in price, the supply is said to be elastic.

Definition of Inelastic Supply:

If the amount offered for sale is less affected by price change, then the supply is said to be inelastic.

Relation between Price and Supply:

The elasticity of supply is great or small accordingly as the amount offered for sale increases much or little for a given rise in price. Boulding in his book “Economic Analysis” writes:

“The relation between price and the quantity of supply is rather like the relation between a whistle and a dog, the louder the whistle, the faster comes the dog; raise the price and quantity supplied increase. If the dog is responsive in economic terminology; elastic-quite a small crescendo in the whistle will send him bounding along. If the dog is unresponsive or inelastic, we may have to whistle very loudly before he comes along at all”.