Questions on price elasticity of supply

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?