Flashcards
Elasticity
Cards in this deck (16)
- 1What is the def. of PESPrice Elasticity of supply - the responsiveness of a change in quantity supplied to a change in the price of a good.
- 2How to work out PES ?the percentage change in quantity supplied DIVIDED by the percentage change in price
- 3What is market equilibrium ?Where price and quantity meet
- 4What is market disequilibrium ?Where demand price is not equal to the supply price and the quantity demanded is not equal to the quantity supplied
- 5What are the factors that affect PES ?STOCK LEVELS
PRODUCTION SPEED
SPARE CAPACITY
EASE OF ENTRY INTO THE MARKET - 6Explain how 'STOCK LEVELS' and 'PRODUCTION SPEED' affect PES ?Stock levels = Producers can hold stock of foods and can respond more quickly to price changes; therefore supply is elastic.
Production speed = Goods that are produced quickly so the supply will be elastic. However e.g. farmers cannot increase their supply until they can grow more and so is Inelastic. - 7Explain how SPARE CAPACITY and EASE OF ENTRY INTO THE MARKET affected the PES ?Spare capacity = Enables producers to have the flexibility to produce more with their resources so that their supply will be elastic.
Ease of entry into the market = If it is difficult for new firms to enter the markets then supply will be INelastic - 8CALCULATING PES : what do the values represent 0 0<1 1Perfectly inelastic
Inelastic
Elastic
Perfectly inelastic - 9CALCULATING PES - EXPLAIN: perfectly inelastic - 0 Inelastic - 0<10 = Price has no effect on supply at all
0<1 = Price has a small effect on supply - 10CALCULATING PES - EXPLAIN: Elastic - 1< infinity Perfectly Elastic - infinity1
- 11DESCRIBE a perfectly INELASTIC supply curve :Supply line is straight. It is not responsive
- 12DESCRIBE pes overtime:Supply will become more elastic overtime.
The supply line moves right each time diagonally - 13PRICE ELASTICITY OF DEMAND (p.e.s)0 - Perfectly inelastic - has no affect on demand
0<1 - Inelastic - Price has a small effect on demand
1 - Unitary - Changes are the same
1 - 14DESCRIBE an Elastic SUPPLY CURVE:SUPPLY = UP diagonally {refer to notes}
percentage change in price is smaller than the percentage change in quantity supplied. - 15DESCRIBE an Inelastic SUPPLY CURVE:SUPPLY = up diagonally but more to the left
{refer to book}
Percentage change in price is bigger than the percentage change in quantity supplied. - 16—
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- Flashcards on Elasticity, created by Av's study on 19/05/2016.
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