Determinants Of Pes
Economics notes
Determinants Of Pes
➡️ Supply and Demand: The supply and demand of a particular good or service will affect the price elasticity of supply (PES). If demand is high and supply is low, PES will be more elastic, meaning that a small change in price will result in a large change in quantity supplied. Conversely, if demand is low and supply is high, PES will be less elastic, meaning that a large change in price will result in a small change in quantity supplied.
➡️ Price of Substitutes: The price of substitutes will also affect PES. If the price of a substitute is low, PES will be more elastic, as consumers will be more likely to switch to the substitute. Conversely, if the price of a substitute is high, PES will be less elastic, as consumers will be less likely to switch to the substitute.
➡️ Availability of Substitutes: The availability of substitutes will also affect PES. If there are many substitutes available, PES will be more elastic, as consumers will have more options to choose from. Conversely, if there are few substitutes available, PES will be less elastic, as consumers will have fewer options to choose from.
What are the main determinants of the Price Elasticity of Supply (PES)?
The main determinants of the Price Elasticity of Supply (PES) include the availability of substitutes, the time frame of the supply, the number of suppliers, and the cost of production. Substitutes are important because they provide an alternative source of supply, which can affect the PES. The time frame of the supply is important because it affects the ability of suppliers to adjust their production in response to changes in price. The number of suppliers affects the PES because it determines the degree of competition in the market. Finally, the cost of production affects the PES because it determines the amount of profit that suppliers can make from selling their product.
How does the availability of substitutes affect the Price Elasticity of Supply (PES)?
The availability of substitutes affects the Price Elasticity of Supply (PES) because it provides an alternative source of supply. If there are many substitutes available, then suppliers will be more likely to adjust their production in response to changes in price. This will result in a higher PES. On the other hand, if there are few substitutes available, then suppliers will be less likely to adjust their production in response to changes in price. This will result in a lower PES.
How does the cost of production affect the Price Elasticity of Supply (PES)?
The cost of production affects the Price Elasticity of Supply (PES) because it determines the amount of profit that suppliers can make from selling their product. If the cost of production is high, then suppliers will be less likely to adjust their production in response to changes in price. This will result in a lower PES. On the other hand, if the cost of production is low, then suppliers will be more likely to adjust their production in response to changes in price. This will result in a higher PES.