Allocation of Resources · 3 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 10% of your exam marks.
PES definition, formula, calculation, and determinants appear on most papers; typically 4 to 6 marks paired with PED or market analysis questions.
Price elasticity of supply (PES) is the responsiveness of the quantity supplied to a change in the price of the good.
PES is the mirror of PED on the producer side. The law of supply (topic 5) says that when price rises, the quantity supplied rises. PES asks: by how much? A factory with spare machinery and a warehouse of stock can ramp up output overnight; a coffee farmer cannot bring in a fresh harvest until next season. PES puts a single number on that responsiveness.
A definition that just says "how supply changes when price changes" loses the second mark. The keyword examiners want is responsiveness (or "responsiveness of quantity supplied").
Define elastic supply (2 marks)
What comes up: a 2-mark question asking you to define elastic supply (or to state what it means for supply to be elastic).
Write (two marks): (1) The percentage change in quantity supplied is greater than the percentage change in price. (2) Equivalently: PES is greater than 1.
Watch out: writing only that "supply increases when price rises" scores zero — this describes the law of supply, not elasticity. You must bring in the comparison of percentage changes.