How to Calculate Price Elasticity of Supply

Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price; above 1 is elastic, below 1 inelastic.

Formula

PES = %ΔQs ÷ %ΔP, with %Δ = (new − old) ÷ ((new + old) ÷ 2) on AP exams. PES > 1 elastic, < 1 inelastic, = 1 unit elastic.

Steps

1
Find the % change in quantity supplied (midpoint). (Q₂ − Q₁) ÷ ((Q₁ + Q₂) ÷ 2).
2
Find the % change in price (midpoint). (P₂ − P₁) ÷ ((P₁ + P₂) ÷ 2).
3
Divide. PES = %ΔQs ÷ %ΔP. It is positive because supply slopes upward.
4
Interpret. PES > 1 = elastic supply, < 1 = inelastic, = 1 = unit elastic. A vertical supply curve is perfectly inelastic (PES = 0).

Worked example

Price rises from $4 to $6 and quantity supplied rises from 90 to 110. %ΔQs = 20 ÷ 100 = 20%; %ΔP = 2 ÷ 5 = 40%. PES = 20% ÷ 40% = 0.5 → inelastic supply.

Frequently asked questions

Why is price elasticity of supply positive?

The law of supply says price and quantity supplied move in the same direction, so both percentage changes have the same sign and the ratio is positive.

What determines how elastic supply is?

Time is the biggest factor — supply is more elastic in the long run when firms can adjust all inputs. Spare capacity, mobile resources, and easy storage also make supply more elastic.

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Definition

Price Elasticity of Supply →

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