Price elasticity of supply

Definition and formula

Price elasticity of supply (PES) = % change in quantity supplied / % change in price.

PES is positive because supply curves slope upwards.

• Perfectly inelastic (PES = 0): vertical supply curve; quantity cannot change, for example seats in a stadium on match day.
• Inelastic (0 to 1).
• Unitary (PES = 1): any straight-line supply curve through the origin.
• Elastic (more than 1).
• Perfectly elastic (infinity): horizontal supply curve.

Diagram tip: a straight-line supply curve that starts on the price axis is elastic; one that starts on the quantity axis is inelastic; one through the origin is unitary.

Factors influencing PES

The specification lists:

• Time period: supply is more elastic the longer producers have to respond.
• Stocks and perishability: firms holding large stocks of a storable good can respond quickly (elastic). Perishable goods (fresh fruit, flowers) cannot be stored, so supply is inelastic.
• Factor mobility: if labour and capital can easily move into producing this good, supply is elastic.
• Legal constraints: planning permission, licences and quotas limit expansion (inelastic), for example housing land or taxi licences.
• Spare capacity: firms with idle machinery and workers can increase output quickly (elastic); firms at full capacity cannot.

Short run and long run

• The short run is the period in which at least one factor of production is fixed (usually capital: factory size, land). Firms can only change variable factors such as labour hours and raw materials, so supply is relatively inelastic.
• The long run is the period in which all factors are variable: firms can build new factories and new firms can enter. Supply becomes more elastic.

Example: if the price of cocoa rises, farmers can only harvest existing trees this year (inelastic); new trees take years to mature, so supply becomes more elastic in the long run. Diagram in words: draw a steep short-run supply curve and a flatter long-run supply curve through the same initial point.

Worked example

The price of a component rises from $50 to $60 and the quantity supplied rises from 2,000 to 2,200. Calculate and interpret PES.

1. % change in quantity supplied = 10%.
2. % change in price = 20%.
3. PES = 10 / 20 = 0.5.

Answer: PES = 0.5: supply is price inelastic.

Check yourself

1. A rise in price of 25% leads to a rise in quantity supplied of 40%. Calculate PES.
   Show answer

   1.6. PES = 40 / 25 = 1.6: elastic.

2. PES for a product is 0.3. Price rises by 20%. Calculate the percentage change in quantity supplied.
   Show answer

   6 %. %ΔQs = 0.3 x 20 = 6%.

3. A vertical supply curve has a PES of
   • one
   • infinity
   • zero
   • minus one
   Show answer

   zero. Quantity supplied cannot change at all.

4. Why is the supply of fresh strawberries price inelastic in the short run?
   • They have many substitutes
   • They are perishable and cannot be stored, and new plants take time to grow
   • Consumers are addicted to them
   • Farmers always have spare capacity
   Show answer

   They are perishable and cannot be stored, and new plants take time to grow. No stocks to release and fixed growing capacity.

5. A straight-line supply curve passing through the origin has a PES of
   • zero
   • infinity
   • more than one at every point
   • one at every point
   Show answer

   one at every point. Proportional changes in price and quantity along the line.

6. Supply is usually more price elastic in the long run because
   • demand becomes more elastic
   • all factors of production can be varied and new firms can enter
   • costs of production never change
   • firms run down their stocks
   Show answer

   all factors of production can be varied and new firms can enter. In the long run capital can be increased.

7. Explain how spare capacity affects the price elasticity of supply.
   Show answer

   Firms with spare capacity have idle machinery and workers, so they can increase output quickly and cheaply when price rises, making supply price elastic. Firms at full capacity cannot, so supply is inelastic.. Link idle resources to a quick output response.

Practise with instant feedback Print this lesson

Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Economics specification (2018)

Last updated 8 November 2026. Spotted a mistake? Tell us.