A price rise is good news for producers, but only if they can actually make more. A T-shirt factory can add a shift this week. An avocado grower has to wait years for new trees. Price elasticity of supply measures that difference.
📘 What you need to know
PES measures how responsive quantity supplied is to a change in price.
PES = % change in quantity supplied ÷ % change in price.
PES is normally positive, because price and quantity supplied move the same way.
PES > 1 = elastic supply (producers react easily). PES < 1 = inelastic supply (they cannot react much).
Extremes: PES = 0 is a vertical supply curve (a fixed number of seats), PES = infinity is horizontal.
What decides it: spare capacity, stocks, mobility of factors, how fast costs rise, and time.
Supply is always more elastic in the long run, because firms can change everything given enough time.
Calculating PES
Exactly the same routine as PED, with quantity supplied on top instead of quantity demanded.
Price elasticity of supply
PES = % change in quantity supplied ÷ % change in price
When you see a PES question, think like a producer, not a shopper. Students lose marks by writing about substitutes and household budgets, which belong to PED.
WORKED EXAMPLE
The price of tomatoes rises from $2.00 to $2.50 a kilo. A farm increases weekly output from 800 kg to 840 kg. Calculate the PES and explain the value. [4]
Step 1: % change in quantity supplied(840 − 800) ÷ 800 × 100 = +5%Step 2: % change in price(2.50 − 2.00) ÷ 2.00 × 100 = +25%Step 3: dividePES = 5 ÷ 25 = 0.2Step 4: explain
Supply is price inelastic. Tomatoes take a growing season, so even a big price rise cannot produce much extra output quickly.
PES = 0.2, supply is inelasticNever write the answer as a percentage. PES is just a number.
WORKED EXAMPLE
A furniture maker has a PES of 1.5 and currently supplies 2,000 chairs a month. The market price rises by 8%. Estimate the new quantity supplied. [2]
Step 1: rearrange% change in QS = PES × % change in PStep 2: substitute1.5 × 8 = +12%Step 3: apply it2,000 × 1.12 = 2,240 chairsOutput rises to about 2,240 chairs a monthPES above 1 means output grows faster than price.
Steep and shallow supply curves
The picture works the same way as it does for demand. A shallow supply curve means producers can pour extra output into the market when the price nudges up. A steep one means they are stuck with roughly what they have.
Supply curves always slope up. What changes between industries is how flat that slope is.
The extreme values
Notice the last one: a supply line through the origin is unit elastic no matter how steep you draw it.
What makes supply elastic or inelastic
Five things decide how easily producers can react. In an exam, pick the one or two that fit the industry in the question.
Ask yourself what is stopping this producer from making more tomorrow. That blockage is the determinant you should write about.
Going through them
Spare capacity. A factory running at half speed can double output almost immediately, so supply is elastic. A factory already flat out cannot.
Stocks. If the good can be stored, a producer can release stock the moment prices rise. Tinned food, yes. Fresh fish and haircuts, no.
Mobility of factors of production. If land, workers and machines can be moved between products easily, supply is elastic. A clothing factory can switch from trousers to jackets; a copper mine cannot become anything else.
How fast costs rise. If making extra units only costs a little more, firms happily expand. If each extra unit gets expensive fast, they stop, and supply is inelastic.
Time. The big one. In the short run some factors are fixed, so supply is inelastic. In the long run everything can change, so supply is much more elastic.
The primary commodity problem again. Crops and minerals score badly on nearly every determinant: no spare capacity, poor storage, immobile factors and long production times. That low PES, combined with low PED, is why commodity prices swing so hard when the harvest is good or bad.
WORKED EXAMPLE
Explain why the PES of coffee beans is likely to be lower than the PES of coffee mugs. [4]
Step 1: think like each producer
Coffee is grown; mugs are manufactured.
Step 2: apply the determinants to coffeeLong growing time, no spare capacity, land cannot switch quickly, beans spoil.Step 3: apply them to mugsExtra shifts possible, mugs store indefinitely, machinery can be redirected.Step 4: conclude
A price rise brings almost no extra beans this year, but plenty of extra mugs within weeks.
Coffee has low PES; mugs have high PESName the determinants explicitly — that is where the marks sit.
🧩 A safe order for any PES question
% change in quantity supplied over the old quantity.
% change in price over the old price.
Divide quantity by price, and leave the answer as a plain number.
Describe it: above 1 elastic, below 1 inelastic.
Explain it with one or two determinants that fit the industry.
Mention the time frame if the question allows — short run and long run give different answers.
💡 Exam tip
Never write PES as a percentage. It is a ratio of two percentages, so the units cancel.
Say quantity supplied, not demand. Sloppy wording suggests you have answered the wrong question.
Short run versus long run is the easiest evaluation point on this topic. Use it.
For a diagram, draw the supply curve flatter or steeper to match the value you calculated.
If a question gives PES and a price change, rearrange: %QS = PES × %P.
Link low PES to price volatility when a question is about farmers or oil.
⚠ Common mix-up
Answering with PED determinants. Substitutes and income belong to demand, not supply.
Expecting a negative answer. PES is positive, because supply slopes upwards.
Saying a steep supply curve is always inelastic. Any straight line through the origin has PES = 1 however steep it looks.
Forgetting the time frame. The same industry can be inelastic this month and elastic in five years.
Confusing a shift with elasticity. PES describes movement along the supply curve.
Writing the answer as a percentage, which the mark scheme treats as wrong.
Up next: Why Governments Intervene in Markets — markets do a lot on their own, but not everything, and this is where the government walks in.
Want this explained one-to-one?
Book a free session with an experienced IB Economics tutor and get your trickiest topics made simple.
