Question

Explain various methods to measure Price Elasticity of Supply. (Answer in detail)

Answer 1

Like elasticity of demand, the most common method for measuring price elasticity of supply (Es) is percentage method. This methodis also known as 'Proportionate Method'. According to this method, elasticity is measured as the ratio of percentage change in the quantity supplied to percentage change in the price.

Answer 2

Price supply elasticity (PES) concept measures the responsiveness of the quantity supplied to a price change.

• PES is the measure of the change in the quantity supplied to the price change for a specific commodity ( % change in QS / % change in price). There are numerous factors directly affecting the supply elasticity for a good, including stock, time period, substitute availability, and the spare capacity.

• The price elasticity of supply has many values:

• PES > 1 - This depicts supply is elastic.
• PES < 1 -This depicts supply is inelastic.
• PES = 0 - This depicts that the supply curve is vertical and there is zero   response to the demand to prices. This means that supply is “perfectly inelastic.”
• PES =  ∞  or infinity - This depicts that the supply curve is horizontal and there is an extreme change in demand with response to very small change in the prices. This means that the supply is “perfectly elastic.”