Price elasticity of supply
Price elasticity of supply (PES or Es) is a measure used in economics to show the responsiveness, or elasticity, of the quantity supplied of a good or service to a change in its price.
The elasticity is represented in numerical form, and is defined as the percentage change in the quantity supplied divided by the percentage change in price.
When the coefficient is less than one, the supply of the good can be described as inelastic; when the coefficient is greater than one, the supply can be described as elastic. An elasticity of zero indicates that quantity supplied does not respond to a price change: it is "fixed" in supply. Such goods often have no labor component or are not produced, limiting the short run prospects of expansion. If the coefficient is exactly one, the good is said to be unitary elastic.
The quantity of goods supplied can, in the short term, be different from the amount produced, as manufacturers will have stocks which they can build up or run down.
Various research methods are used to calculate price elasticities in real life, including analysis of historic sales data, both public and private, and use of present-day surveys of customers' preferences to build up test markets capable of modelling elasticity such changes. Alternatively, conjoint analysis (a ranking of users' preferences which can then be statistically analysed) may be used.
It is important to note that elasticity and slope are, for the most part, unrelated. Thus, when supply is represented linearly, regardless of the slope of the supply line, the coefficient of elasticity of any linear supply curve that passes through the origin is 1 (unit elastic). The coefficient of elasticity of any linear supply curve that cuts the y-axis is greater than 1 (elastic), and the coefficient of elasticity of any linear supply curve that cuts the x-axis is less than 1 (inelastic). Likewise, for any given supply curve, it is likely that PES will vary along the curve.
...
Wikipedia