Price elasticity of supply
Price elasticity of supply: build the core model, apply it to evidence and qualify conclusions where outcomes depend on context.
Section 2.3 · Price elasticity of supply
9708 section 2.3; AS Level. Checked against Cambridge's 2026–2028 Version 2 (latest version published December 2025) and 2029 Version 1 (published September 2026). Cambridge states that neither version has significant changes affecting teaching. Always follow the syllabus for the candidate's examination year.
Before you begin
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
What does a PES magnitude below one mean?
What you will learn
- Define and calculate PES
- Interpret sign and magnitude
- Explain supply responsiveness and reaction time
Core model and terms
PES = percentage change in quantity supplied ÷ percentage change in price. A positive coefficient is usual. A magnitude above one is elastic supply; below one is inelastic supply; the measure describes responsiveness over the stated period.
Apply and evaluate
Spare capacity, stocks, production time, mobility of factors and ease of storage can influence PES. Firms may respond more fully in the long run as capacity and inputs adjust. Do not infer elasticity from a steep-looking curve without checking the axes and units.
Pause and explain
Which statement best applies price elasticity of supply?
Worked example
Price rises 8% and quantity supplied rises 4%. Calculate PES.
Show the worked solution
- PES = 4% ÷ 8%
- PES = 0.5
- Supply is inelastic over the stated interval
Answer PES = 4% ÷ 8% → PES = 0.5 → Supply is inelastic over the stated interval
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Price rises 8% and quantity supplied rises 4%. Calculate PES.
Give me a hint
Identify the relevant idea in price elasticity of supply, then trace the economic chain.
Compare my reasoning
- PES = 4% ÷ 8%
- PES = 0.5
- Supply is inelastic over the stated interval
PES = 4% ÷ 8% PES = 0.5 Supply is inelastic over the stated interval
Look for these in your work
- PES = 4% ÷ 8%
- PES = 0.5
- Supply is inelastic over the stated interval
A farm has finished its harvest when crop prices rise. Explain why short-run PES may be low.
Give me a hint
Consider whether output can be changed immediately.
Compare my reasoning
- The crop is already harvested
- Current stocks limit extra output
- Supply cannot respond much until a later production cycle
The crop is already harvested Current stocks limit extra output Supply cannot respond much until a later production cycle
Look for these in your work
- The crop is already harvested
- Current stocks limit extra output
- Supply cannot respond much until a later production cycle
A manufacturer has spare capacity and can add shifts. Explain the likely supply response to a price rise.
Give me a hint
Link unused capacity to output decisions.
Compare my reasoning
- A higher price raises the incentive to supply
- Spare machinery and labour can be used
- Quantity supplied may respond relatively strongly
A higher price raises the incentive to supply Spare machinery and labour can be used Quantity supplied may respond relatively strongly
Look for these in your work
- A higher price raises the incentive to supply
- Spare machinery and labour can be used
- Quantity supplied may respond relatively strongly
Two goods have equal PES today, but one can be stored and one spoils quickly. Explain why their longer-run responses may differ.
Give me a hint
Consider inventories, production time and adjustment.
Compare my reasoning
- Storage lets firms shift stock across periods
- Perishable output is harder to hold
- Their supply responses can diverge over time
Storage lets firms shift stock across periods Perishable output is harder to hold Their supply responses can diverge over time
Look for these in your work
- Storage lets firms shift stock across periods
- Perishable output is harder to hold
- Their supply responses can diverge over time
Common mistakes
- Ignoring the time period when comparing supply responsiveness.
What can you explain now?
What does a PES magnitude below one mean?
Compare with the explanation
Quantity supplied changes proportionally less than price
A magnitude below one indicates inelastic supply for the measured period.
After trying it yourself, choose your next review. This is your self-assessment.
Your review choice appears on Today. Sign in to sync it across devices.
Make it stick
Before moving on, explain the central idea in price elasticity of supply and state one condition that could change its effect.
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.