Elasticity of Supply

    OCR
    GCSE

    The Price Elasticity of Supply (PES) measures the responsiveness of quantity supplied to a change in price, ceteris paribus. Mastery requires precise application of the formula (%ΔQS / %ΔP), graphical derivation of supply curves ranging from perfectly inelastic to perfectly elastic, and a deep understanding of the determinants of elasticity. Candidates must analyze the critical role of time lags (momentary, short-run, long-run), factor mobility, spare capacity, and inventory levels in determining the coefficient. This topic is fundamental to understanding market volatility, tax incidence, and the efficacy of supply-side policies.

    6
    Objectives
    4
    Exam Tips
    4
    Pitfalls
    3
    Key Terms
    4
    Mark Points

    Learning Objectives

    What you need to know and understand

    • Formula: % change in Quantity Supplied / % change in Price
    • PES > 1 indicates Price Elastic Supply (responsive)
    • PES < 1 indicates Price Inelastic Supply (unresponsive)
    • PES = 0 indicates Perfectly Inelastic Supply (vertical curve)
    • Spare capacity and high stock levels increase elasticity
    • Short run supply is generally inelastic due to fixed factors

    Marking Points

    Key points examiners look for in your answers

    • Award marks for the correct statement and application of the formula: % change in quantity supplied / % change in price.
    • Credit responses that explicitly link the value of PES (e.g., >1) to the correct terminology (Price Elastic).
    • Candidates must analyse determinants (e.g., spare capacity, stock levels) using chains of reasoning to explain why supply is responsive or unresponsive.
    • For evaluation, award top marks to responses that assess the significance of time lags in production processes.

    Examiner Tips

    Expert advice for maximising your marks

    • 💡Always write the formula before attempting the calculation to secure method marks even if the final arithmetic is incorrect.
    • 💡Use the mnemonic 'TEASS' (Time, Economy, Availability of factors, Stocks, Spare capacity) to recall determinants of PES.
    • 💡When analysing graphs, remember that a supply curve starting from the origin has a unitary elasticity (PES = 1) regardless of slope.
    • 💡In 6-mark questions, ensure you apply the concept to the specific industry in the case study (e.g., why fresh produce is inelastic vs. canned goods).

    Common Mistakes

    Pitfalls to avoid in your exam answers

    • Inverting the formula by calculating % change in Price divided by % change in Quantity Supplied.
    • Confusing 'slope' with 'elasticity'; assuming a steep curve is always inelastic without reference to specific percentage changes.
    • Failing to distinguish between 'production time' (time to produce) and 'time period' (short run vs long run).
    • Omitting the negative sign for PED (though not applicable to PES, students often confuse the two conventions).

    Study Guide Available

    Comprehensive revision notes & examples

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    Key Terminology

    Essential terms to know

    Likely Command Words

    How questions on this topic are typically asked

    Calculate
    Explain
    Analyse
    Evaluate
    Discuss
    State

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