PES - calculation
Syllabus: Calculate the PES
Follow the links below to see some sample calculations if you are not sure about how to calculate the value of price elasticity of supply.
Price elasticity of supply measures the ability of a firm to increase or decrease its output in response to a change in price. This sensitivity changes with time, or rather with economic time and the degree of substitutability between factors of production.
Unitary elasticity of supply
Any straight-line supply function that passes through the origin has a coefficient of 1. Look at Figure 1. All the supply functions have an elasticity of 1.
So do not just assume the PES from the gradient of the supply curve.