Price Elasticity of Supply Calculator
Measure how responsive the quantity supplied of a good is to changes in its price. Understand whether supply is elastic or inelastic to make better production and pricing decisions.
Enter Your Values
Price Elasticity of Supply (PES)
% Change in Quantity: +26.09%
% Change in Price: +18.18%
A 1% increase in price leads to a 1.45% increase in quantity supplied.
Supply Curve Visualization
Elasticity Comparison
Table of Contents
What is Price Elasticity of Supply?
Price elasticity of supply (PES) is an economic measure that quantifies how responsive the quantity supplied of a good or service is to changes in its price. It represents the degree to which producers can and will adjust their production levels when market prices change.
Unlike price elasticity of demand, which is typically negative, price elasticity of supply is usually positive. This reflects the law of supply: as prices increase, producers are motivated to supply more because higher prices generally mean higher profits.
The PES Formula
The price elasticity of supply is calculated using the midpoint method:
PES = [(Q₂ - Q₁) / ((Q₂ + Q₁) / 2)] ÷ [(P₂ - P₁) / ((P₂ + P₁) / 2)]
Simplified:
PES = (% Change in Quantity Supplied) / (% Change in Price)
Example Calculation
A farmer supplies 10,000 bushels at $5/bushel. When price rises to $6, they supply 12,500 bushels.
% Change in Quantity: (12,500 - 10,000) / 11,250 × 100 = +22.22%
% Change in Price: ($6 - $5) / $5.50 × 100 = +18.18%
PES: 22.22% / 18.18% = 1.22 (Elastic)
Types of Supply Elasticity
| Type | PES Value | Description |
|---|---|---|
| Perfectly Inelastic | PES = 0 | Quantity doesn't change with price |
| Inelastic | 0 < PES < 1 | Quantity changes less than price |
| Unit Elastic | PES = 1 | Quantity changes proportionally |
| Elastic | PES > 1 | Quantity changes more than price |
| Perfectly Elastic | PES = ∞ | Any quantity at fixed price |
Key Determinants
1. Availability of Inputs
When raw materials and labor are readily available, producers can increase output easily, making supply more elastic.
2. Production Capacity
Firms with spare capacity can quickly increase production. At full capacity, supply becomes more inelastic.
3. Time Horizon
Long-run supply is typically more elastic than short-run supply as producers have time to adjust all factors of production.
4. Storage Capabilities
Products that can be stored allow producers to release inventory when prices rise, increasing elasticity.
Time and Elasticity
Time is crucial in determining supply elasticity:
- Momentary: Supply is perfectly inelastic - no immediate adjustment possible
- Short Run: Variable factors can be adjusted; fixed factors cannot
- Long Run: All factors variable; new firms can enter; most elastic
Real-World Examples
Elastic Supply (PES > 1)
- Digital products (software, e-books)
- Standardized manufacturing
- Services with excess capacity
Inelastic Supply (PES < 1)
- Agricultural products (growing season)
- Real estate (construction time)
- Skilled professionals (training time)
Frequently Asked Questions
Why is PES usually positive?
Because price and quantity supplied move in the same direction following the law of supply.
How does technology affect PES?
Technology generally increases elasticity by making production more flexible and efficient.