Price elasticity of supply - questions

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PES

Question 1

Contrast the price elasticity of supply for:

  1. A computer software producer

  2. A potato farmer

  3. A firm of solicitors

PES shows quickly a firm can respond to a change in market conditions. More specifically it shows how quickly firms respond to a change in price.

Question 2

The following shows 3 different car producer’s supply schedules (millions of cars):

Price £000 Firm X Firm Y Firm Z
10 5 15 20
12 7 16 20
14 9 17 20
16 11 18 20
18 13 19 20
20 15 20 20
22 17 21 20
24 19 22 20
26 21 23 20
28 23 24 20

1.    Using the correct equation, work out the PES value for all three firms for the price range £24,000 to £26,000.

2.    Draw all three supply curves, labelling them correctly.

3.    Which firm is the most competitive, and why?

4.    What could the ‘least competitive’ firm do to improve its competitiveness?

 


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