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.
A typical 4-mark "calculate PES" question rewards a clear three-step method plus a one-line interpretation.
Step 1. Calculate the percentage change in quantity supplied.
Step 2. Calculate the percentage change in price.
Step 3. Divide: PES = %ΔQs ÷ %ΔP.
Step 4. Interpret the result: say whether supply is elastic (
PES > 1) or inelastic (PES < 1).
Example — The market price of bottled water rises from £0.80 to £1.00 per bottle. A regional bottling plant raises weekly output from 50,000 bottles to 75,000. Calculate the PES.
Step 1: percentage change in Qs
%ΔQs = (75,000 − 50,000) ÷ 50,000 × 100 = +50 %
Step 2: percentage change in P
%ΔP = (1.00 − 0.80) ÷ 0.80 × 100 = +25 %
Step 3: calculate PES
PES = +50 ÷ +25 = +2.0
Step 4: interpret
PES = 2.0 > 1, so supply is relatively elastic. The percentage rise in output (50%) is twice the percentage rise in price (25%). The bottling plant clearly has spare capacity and a flexible workforce, so it can increase production faster than the price rise.
Example — The market price of a particular vintage wine doubles, but the quantity available from cellars rises by only 5%.
%ΔP = +100 %%ΔQs = +5 %PES = 5 ÷ 100 = 0.05PES = 0.05 < 1, so supply is very inelastic. The wine cannot be produced again (it has already been bottled), so quantity is almost fixed.
Examiners apply error-carried-forward (ECF) generously here too. A slip in step 1 still earns the later marks if the working stays internally consistent. Always show every step.
A common slip: writing the final answer as a percentage ("PES = 9.1%"). PES is a pure number: a ratio of two percentages. Just write "PES = 0.091" or "PES = 2.0".