If PES is equal to zero, PES is perfectly inelastic. In the very short-run, it is impossible for firms to increase supply straight away, no matter what the price level is, until new factors of production are employed. Thus, it is possible that PES is zero.
Value of PES | Elasticity | Interpretation |
Between 0 and 1 | Inelastic | A change in the price leads to a less than proportionate change in supply |
Greater that 1 (less than infinity) | Elastic | A change in the price leads to a greater than proportionate change in supply |
1 | Unit elastic | A change in the price leads to a proportionate change in supply |
Determinants of PES
How much costs rise as output increases – PES will be lower thus inelastic if costs rise significantly as producers attempt to increase output.
Time period considered – perfectly inelastic in the short run before new factors of production are employed.
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