Price Elasticity of Supply (PES)

Measures how sensitive quantity supplied is to a change in price. Elasticity of supply shows how sensitive producers are to a change in price.

\begin{matrix} (Price Elasticity of Supply (PES)) & PES = \frac{% Δ Q}{% Δ P} \end{matrix}

Elasticity is based on time limitations. Producers need more time to produce more.

Inelastic = Insensitive to a change in price Most goods have inelastic supply in the short-run

Elastic = Sensitive to a change in price Most goods have elastic supply in the long-run

Perfectly Inelastic Supply = Quantity Supplied doesn't change Set quantity supplied (vertical line)

Three characteristics of goods with inelastic supply

Difficulty or high cost of increasing production quickly
Producers cannot easily ramp up output in response to a price increase, often due to limited resources, complex production processes, or time-consuming regulatory approvals.
Limited availability of key inputs or factors of production
The raw materials, labor, or specialized equipment needed to produce the good are scarce or not easily expandable in the short run.
Significant time lag between production decisions and actual output
For example, agricultural goods (like wheat or coffee) take months to grow, and extracting natural resources (like oil or minerals) requires exploration and setup, meaning supply cannot adjust immediately to price changes.