Topics: Microeconomics | Price Mechanism | Price Elasticity of Supply (PES)
Level: JC H1/H2 Economics / IB Economics SL/HL
Struggle to recall the determinants of PES during exams? When time is running out and you need to evaluate why supply is price-elastic or inelastic, you don’t want your mind to go blank. In our Economics tuition classes, we use catchy songs and mnemonics to make these core determinants stick permanently.
Listen to the track above and follow the concept breakdown below:
1. The Core Determinants of PES (0:00 – 0:15)
Lyric: “Factor substitutability, resource and stock availability…”
Factor Substitutability: How easily can a firm switch its machines and labor from producing one good to another? High substitutability means highly elastic supply.
Stock Availability (Inventories): If a firm has plenty of finished goods sitting in a warehouse, it can respond to a price increase immediately, making supply highly elastic.
2. Production Time and Spare Capacity (0:16 – 0:30)
Lyric: “Ease of substitution of factors, a short production time with some spare capacity…”
Production Time length and complexity: Agricultural goods (like crops) take months to grow, meaning supply is price-inelastic. Manufactured goods that can be produced in minutes have a highly price-elastic supply.
Extent of Spare Capacity: If a factory is only running at 50% capacity, it can easily ramp up production without buying new factories, leading to great price elasticity of supply.
3. Market Structure (0:30 – End)
Lyric: “Number of suppliers…”
Number of Suppliers: A market with many suppliers will generally have a more price-elastic market supply curve than a monopoly, as the combined ability to increase output is much higher.
Can’t get the tune out of your head? That is exactly the point! Join our JC Economics Tuition A-Level or IB Economics Tuition classes to access our full library of proprietary “Hacks” and songs. (For more detailed explanations, read our Free Notes on Elasticities & Applications. For other topics, browse our full Economics Notes Library.)