2.3.1—Price elasticity of supply

Price elasticity of supply (PES) measures the percentage change in quantity supplied divided by the percentage change in the good’s own price.

A positive PES is usual because a higher price gives firms an incentive to supply more, but the response depends on spare capacity, stocks and how quickly inputs can adjust.

If price rises and firms can quickly add shifts, quantity supplied may respond strongly; a harvest crop with fixed output in the short run is less responsive.

PES concerns producers’ response to price, not consumers’ response to income or a shift in demand.