2.8 Price Elasticity of Supply (PES)

2026 Syllabus Objectives

By the end of this topic, you should be able to:

  • 2.8.1 Define Price Elasticity of Supply (PES)
  • 2.8.2 Calculate PES using the formula and interpret what the result means; draw and interpret supply curve diagrams showing different types of PES
  • 2.8.3 Explain the key factors (determinants) that influence whether supply is elastic or inelastic
  • 2.8.4 Explain the significance of PES for consumers, producers, and the government

1. What is Price Elasticity of Supply (PES)?

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Price Elasticity of Supply (PES) measures how much the quantity supplied of a good changes when its price changes.

In simple terms: if the price of a product goes up, will producers be able to supply a lot more of it quickly — or only a little more?

  • If supply reacts a lot to a price change → supply is elastic
  • If supply barely reacts to a price change → supply is inelastic

💡 Remember: there is a positive (direct) relationship between price and quantity supplied. When price goes up, quantity supplied goes up too. This is why PES is always a positive number.

2. The PES Formula

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PES=Percentage change in quantity suppliedPercentage change in price\text{PES} = \frac{\text{Percentage change in quantity supplied}}{\text{Percentage change in price}}

To find each percentage change, use:

% change=New value−Old valueOld value×100\% \text{ change} = \frac{\text{New value} - \text{Old value}}{\text{Old value}} \times 100

Worked Example

Given: Price rises from $10 to $12. Quantity supplied rises from 100 units to 130 units.

Step 1 — % change in quantity supplied:

130−100100×100=30100×100=30%\frac{130 - 100}{100} \times 100 = \frac{30}{100} \times 100 = 30\%

Step 2 — % change in price:

12−1010×100=210×100=20%\frac{12 - 10}{10} \times 100 = \frac{2}{10} \times 100 = 20\%

Step 3 — Calculate PES:

PES=30%20%=1.5\text{PES} = \frac{30\%}{20\%} = 1.5

Interpretation: A PES of 1.5 means that for every 1% increase in price, the quantity supplied increases by 1.5%. Supply is elastic (very responsive).

⚠️ Exam Tip: Always express your final PES answer as a plain number — not as a percentage. Writing "1.5%" is wrong; "1.5" is correct.

3. Types of PES — Values and Diagrams

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3.1 Elastic Supply — PES > 1

  • The quantity supplied changes by a greater percentage than the price change.
  • Producers respond quickly and significantly to a price increase.
  • Example: A clothing factory that can quickly increase the number of T-shirts it makes when prices rise.

Diagram — Elastic Supply:

Price |      /  ← relatively flat supply curve
      |    /
      |  /
      |/__________
           Quantity

A relatively flat (shallow) supply curve = elastic supply.

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