Economics – The allocation of resources - Price elasticity of supply (PES) | e-Consult
The allocation of resources - Price elasticity of supply (PES) (1 questions)
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1. Calculate the percentage change in quantity supplied:
Original Quantity Supplied = 0
New Quantity Supplied = 40
Change in Quantity Supplied = 40 - 0 = 40
Percentage Change in Quantity Supplied = (40 / 0) * 100 = Undefined. However, we can use the midpoint formula.
2. Calculate the percentage change in price:
Original Price = £2
New Price = £6
Change in Price = £6 - £2 = £4
Percentage Change in Price = (£4 / £2) * 100 = 200%
3. Calculate the PES using the midpoint formula:
PES = (% Change in Quantity Supplied) / (% Change in Price)
PES = (40 / 200) = 0.2
Answer: The Price Elasticity of Supply (PES) is 0.20.