5.2 The Price Elasticity of Supply
MyEconLab Concept Video
You know that when demand increases, the equilibrium price rises and the equilibrium quantity increases. But does the price rise by a large amount and the quantity increase by a little? Or does the price barely rise and the quantity increase by a large amount? To answer this question, we need to know the price elasticity of supply.
The price elasticity of supply is a measure of the responsiveness of the quantity supplied of a good to a change in its price when all other influences on sellers’ plans remain the same. We determine the price elasticity of supply by comparing the percentage change in the quantity supplied with the percentage change in price.
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