Price Elasticity of Supply (PES)

    AQA
    GCSE

    Price Elasticity of Supply (PES) measures the responsiveness of quantity supplied to a change in price. It is a critical microeconomic concept determining how markets adjust to disequilibrium. Analysis must focus on the determinants of elasticity—specifically time lags, factor mobility, spare capacity, and inventory levels. Mastery requires the ability to calculate coefficients, interpret graphical representations ranging from perfectly inelastic to perfectly elastic curves, and evaluate the implications of PES for price volatility, particularly in primary commodity markets versus manufactured goods sectors.

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    Objectives
    4
    Exam Tips
    4
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    What You Need to Demonstrate

    Key skills and knowledge for this topic

    • Award marks for the accurate statement and application of the formula: % change in quantity supplied / % change in price.
    • Credit responses that correctly interpret the coefficient: >1 as elastic, <1 as inelastic, and =0 as perfectly inelastic.
    • Candidates must analyse determinants such as the length of the production period or the availability of spare capacity to explain elasticity values.
    • Reward evaluation that links PES to business decision-making, specifically regarding inventory management and pricing strategies.

    Marking Points

    Key points examiners look for in your answers

    • Award marks for the accurate statement and application of the formula: % change in quantity supplied / % change in price.
    • Credit responses that correctly interpret the coefficient: >1 as elastic, <1 as inelastic, and =0 as perfectly inelastic.
    • Candidates must analyse determinants such as the length of the production period or the availability of spare capacity to explain elasticity values.
    • Reward evaluation that links PES to business decision-making, specifically regarding inventory management and pricing strategies.

    Examiner Tips

    Expert advice for maximising your marks

    • 💡Always state the formula before attempting the calculation to secure AO1 marks.
    • 💡When analysing determinants, use the acronym T.E.A.S.S. (Time, Economy, Availability of factors, Stock, Spare capacity).
    • 💡Ensure the distinction between the 'short run' (at least one fixed factor) and 'long run' (all factors variable) is explicit when discussing time.
    • 💡In 15-mark questions, evaluate the extent to which a business can alter its PES in response to market shocks.

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Inverting the formula by placing percentage change in price as the numerator.
    • Confusing the slope of the supply curve with elasticity (assuming a constant slope means constant elasticity).
    • Conflating determinants of PES (e.g., spare capacity) with determinants of PED (e.g., substitutes).
    • Failing to show the working out for calculation questions, resulting in lost method marks if the final answer is incorrect.

    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    Calculate
    State
    Explain
    Analyse
    Assess
    Evaluate

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