Questions on price elasticity of supply
PES
Question 1
Contrast the price elasticity of supply for:
- A computer software producer
- A potato farmer
- 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?
