2.3.3—PES coefficient
- Syllabus
- 9708–2026–2027
- Objective
- 2.3.3
- Level
- AS
The PES sign and size describe direction and responsiveness
The PES sign shows whether quantity supplied moves with price; the absolute size shows how strongly. PES greater than one is elastic, equal to one unitary and below one inelastic.
A coefficient of 0.2 means output changes proportionally less than price; 2.0 means output changes proportionally more. Perfectly inelastic supply is vertical and perfectly elastic supply horizontal in the simple diagrams.
PES = 0.4 indicates an inelastic response, while PES = 1.3 indicates an elastic response.
Do not compare PES magnitudes without checking that the same time horizon and market definition are being used.
ConceptA-Level CAIE Economics AS