Price Elasticity of Supply Worksheet

1. The following shows 3 different car producer’s supply schedules (millions of cars):

Price ($1000) Firm X Firm Y Firm Z

10 5 15 20
12 7 16 20
14 9 17 20
16 11 18 20
18 13 19 20
20 15 20 20
22 17 21 20
24 19 22 20
26 21 23 20
28 23 24 20

a) Using the correct equation, work out the PES value for all three firms for the price range $24,000

to $26,000.

Firm X

QS at $24,000 = 19

QS at $26,000 = 21

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [(21-19)/ 19] x 100

%Δ Price = [(26,000-24,000)/ 24,000] x 100

PES = 1.263 to 3dp

Firm Y

QS at $24,000 = 22

QS at $26,000 = 23

%ΔQS = [(23-22)/ 22] x 100

%Δ Price = [(26,000-24,000)/ 24,000] x 100

PES = .545454……
FIRM Z

Supply doesn’t respond at all to price, so from inspection, PES = 0

b) Using the correct equation, work out the PES value for all three firms for the price range $18,000

to $16000.

Firm X

QS at $18,000 = 13

QS at $16,000 = 11

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [(11-13)/ 13] x 100

%Δ Price = [(16,000-18000)/ 18,000] x 100

PES = 1.4 to 1dp

Firm Y

QS at $18,000 = 19

QS at $16,000 = 18

%ΔQS = [(18-19)/ 19] x 100

%Δ Price = [(16,000-18,000)/ 18,000] x 100

PES = .47 to 2dp

FIRM Z

Supply doesn’t respond at all to price, so from inspection, PES = 0

2.

Price of Quantity of tomatoes

tomatoes in $ supplied in Kilos

5 100
10 1,000
15 2,000
20 5,000
25 10,000

a) Calculate PES for a rise in price from $10 to $15

QS at $10 = 1,000

QS at $15 = 2,000

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [(2,000-1,000)/ 1,000] x 100

%Δ Price = [15-10)/ 10] x 100

PES = 100%/50%

PES = 2

b) Calculate PES for a fall in price from $10 to $5

QS at $10 = 1,000

QS at $5 = 100

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [(100-1,000)/ 1,000] x 100

%Δ Price = [5-10)/ 10] x 100

PES = 1.8
3. When the price of a CD is $13 per CD, 39,000,000 CDs per year are supplied. When the price is $15

per CD, 41,000,000 CDs [er year are supplied. What is the elasticity of supply for CDs?

QS at $13 = 39,000

QS at $15 = 41,000

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [(41,000-39,000)/ 39,000] x 100

%Δ Price = [(15-13)/ 13] x 100

PES = .3333333

4. The table below gives the supply schedule for shoes. Calculate the elasticity of supply when

a) The price rises from $125 to $135 a pair.

QS at $125 = 1400

QS at $135 = 1800

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [1800-1400)/ 1400] x 100

%Δ Price = [(135-125)/ 125] x 100

PES = 3.57

c) The price falls from $125 to $120 a pair.

QS at $125 = 1400

QS at $120 = 1200

PES = %ΔQS/%ΔP

%ΔQS = [(Qz-Q1)/ Q1] x 100

%Δ Price = [(Pz-P1)/ P1] x 100

%ΔQS = [1200-1400)/ 1400] x 100

%Δ Price = [(120-125)/ 125] x 100

PES = 3.57

Price (dollars per pair) Quantity supplied

(millions of pairs per
Year)
120 1,200
125 1,400
130 1,600
135 1,800