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").