Question

What does the price elasticity of supply mean? How do we measure it?

Answer 1

Price elasticity of supply (e_s) is defined as the degree of the responsiveness of quantity supplied, to the change in the price of a good.

It is expressed as:-

`e_s="Percentage change in quality supplied"/"Percentage change in price"`

`=((DeltaQ)/Qxx100)/((DeltaP)/Pxx100)`

`=(DeltaQ)/QxxP/(DeltaP)`

`=(DeltaQ)/(DeltaP)xxP/Q`

Where

ΔQ = change in quantity supplied

ΔP = change in price

P = initial price

Q = initial supply