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Price Elasticity of Supply Calculator

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What is price elasticity of supply?

Price elasticity of supply (PES) measures how responsive supply of an item in relation to changes in its price.

A product with a PES of more than 1 is said to be elastic. When price changes a little, the supply of the product will change by a larger percentage.

A product with a PES of 1 is said to be unit elastic. Supply changes at the same percentage that price changes.

A product with a PES of 0 to 1 is said to be inelastic. Supply changes at a smaller percentage than the price.

A product with a PES of 0 is said to have fixed supply. Even with large price changes, there will be no increase or decrease in the supply of the good.

Formula

Price Elasticity of Supply = % Change in Quantity Supplied / % Change in Price

% Change in Quantity Supplied = (Quantity End – Quantity Start) / Quantity Start

% Change in Price = (Price End – Price Start) / Price Start)

Example

Quantity supplied starts at 2,000 and increases to 30,000. In the same period price increases from $20 to $30.

% Change in Quantity Supplied = (30,000 – 2,000) / 2,000 = 28,000 / 2,000 = 14

% Change in Price = ($30 – $20) / $20 = $10 / $20 = 0.50

Price Elasticity of Supply = 14 / 0.50 = 28

Therefore, price elasticity of supply is 28.

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