2.6.2—PES determinants and diagrams

PES diagrams show how quantity supplied responds to price; determinants include time, spare capacity, stocks, mobility of factors and production complexity.

The same firm may have inelastic short-run supply and elastic long-run supply as capacity changes.

A farmer cannot increase harvest this week, but can plant more next season.

A flatter curve is a modelled response, not a guarantee for every range.

Apply PES to a stated time horizon.

PES classification: perfectly inelastic $PES=0$ is vertical; inelastic $0<PES<1$; unit elastic $PES=1$; elastic $PES>1$; perfectly elastic tends to infinity and is horizontal. Determinants are time, mobility of factors, unused capacity, ability to store output and the rate at which costs rise as output expands. Compare curves only with the same axis scales and market definition.