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Question
What does the price elasticity of supply mean? How do we measure it?
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Solution
Price elasticity of supply (es) 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
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