2.3.4—PES determinants

Supply tends to be more elastic when firms have spare capacity, can store goods, access mobile inputs, use flexible production methods or have a longer time to adjust.

Perishable goods, fixed land or specialist skills can make short-run supply inelastic. The market’s ability to attract new firms also affects long-run response.

Hotel rooms are nearly fixed tonight but new rooms can be built over years, so supply is more elastic in the long run.

A large stock of machinery does not guarantee elastic supply if skilled labour or raw materials remain fixed.