PES | A-Level Economics Notes
These revision notes cover everything you need to know about PES for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What is the formula for PES?
PES = % change in supply/ % change in price
What is the definition of PES?
PES is the responsiveness of supply to a change in price.
What does it mean if PES = 0?
Supply is perfectly inelastic.
Supply cannot change at all when there is an increase in market price. For example, if price increases by 10%, supply will not change.
What does it mean if PES is 1?
Supply is unit elastic. For example, if price increases by 10%, supply will increase by 10%.
What does it mean if PES is between 0 to 1?
Supply is relatively inelastic. For example, if prices increase by 10%, supply will only increase by 4%.
What does it mean if PES is more than 1?
Supply is relatively elastic. For example, if prices increase by 10%, supply will increase by 24%.
What does it mean if PES is ထ?
Supply is perfectly elastic.
What are the factors that affect PES?
SECTS
Substitutability of factors of production
For example, bakery items are elastic in supply as they can ask their chefs to make different items based on what is in demand. Also, they can use their eggs and flour to make many different items based on demand.
Barriers to entry
Taxi services are relatively elastic in supply. If prices went up, new taxi firms could easily enter the market. Or, taxi companies could easily expand the number of drivers they work with.
Capacity
Houses in London are inelastic in supply because there are not enough spare factors of production (land).
Time
It is reasomable to assume that everything becomes more elastic over time for a number of reasons.
Stock
Mangoes are relatively inelastic in supply because firms cannot keep a large stock of them.
Summary questions
- What is the formula for PES?
- What is the definition of PES?
- What does it mean if PES = 0?
- What does it mean if PES is 1?
- What does it mean if PES is between 0 and 1?
- What does it mean if PES is more than 1?
- What does it mean if PES is ထ?
- What are the factors that affect PES?
A-Level Economics Tutoring
I offer one-to-one and small group A-Level Economics tutoring for students across the UK and internationally. With 87+ five-star Google reviews and tutoring experience since 2017, I specialise in helping students understand difficult concepts and improve their exam technique.