Price Elasticity of Supply

harrysimmons4
Mind Map by , created over 5 years ago

Mind Map on Price Elasticity of Supply, created by harrysimmons4 on 02/20/2014.

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harrysimmons4
Created by harrysimmons4 over 5 years ago
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Price Elasticity of Supply
1 Price elasticity of supply measures the responsiveness of quantity supplied to a change in price

Annotations:

  • It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes.
1.1 It is necessary for a firm to know how quickly, and effectively, it can respond to changing market conditions, especially to price changes.
2 Equation
2.1 % change in quantity supplied/ % change in price
3 Perfect elasticity, where supply is infinite at any one price.
3.1 Graph is horizontal
4 Perfect inelasticity, where only one quantity can be supplied
4.1 Graph is vertical
5 Unit elasticity, linear supply curve
6 Determinants
6.1 1. Are resource inputs readily available
6.2 2. Are factors mobile
6.3 3.Can products be easily stored
6.4 4. Is production running at full capacity.
6.5 5. How long and complex is the production cycle
7 A high PES is desirable for a firm, as it makes them more responsive to a change in price, therefore more competitive.
7.1 Improving PES
7.1.1 Create spare capacity
7.1.2 Latest tech
7.1.3 sufficient stocks
7.1.4 Better storage
7.1.5 Flexible Labour
8 <1 = Inelastic. >1 = Elatic

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