Price elasticity of supply (PES): five questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
In response to an increase in price from $5 per kilo to $6 per kilo a chicken farmer increased supply from 400 kilos to 500 kilos per week. What is the price elasticity of supply?
Answer: D.
The correct answer is D: 1.25.
Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Compute each percentage from its starting value.
Price: $5 → $6, a rise of $1 on $5 = 20%
Quantity: 400 → 500 kilos, a rise of 100 on 400 = 25%
PES = 25% ÷ 20% = 1.25
Since the value exceeds 1, supply is elastic over this range: quantity responds proportionately more than price.
Why the other options are wrong:
Price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Compute each percentage from its starting value.
Price: $5 → $6, a rise of $1 on $5 = 20%
Quantity: 400 → 500 kilos, a rise of 100 on 400 = 25%
PES = 25% ÷ 20% = 1.25
Since the value exceeds 1, supply is elastic over this range: quantity responds proportionately more than price.
Why the other options are wrong:
- A, 0.8, is the reciprocal, the result of dividing the price change by the quantity change instead of the other way round. This is the commonest error, and it can be caught by checking the direction: supply here clearly responds strongly, so the answer must exceed 1.
- C, 1.2, and B, 0.9, come from computing one of the percentages against the wrong base, for instance taking the 100-kilo rise against the new figure of 500 (20%) rather than the original 400.
Question 2
A firm has a high price elasticity of supply for its product. What does this indicate?
Answer: B.
Price elasticity of supply measures how much the quantity a firm offers changes when the price changes, so a high value means the firm can adjust output quickly and easily when the price moves. What makes supply elastic is spare capacity, the ability to hire and train workers quickly, and stocks of finished goods that can be released at once. Keeping very low volumes in stock therefore does the opposite of what the option claims, because a firm with nothing in the warehouse has to actually produce more before it can supply more, which makes it slower to respond. The other two options belong to the demand side. Being able to increase revenue by reducing the price is what happens when demand is elastic, and it describes buyers' behaviour rather than the firm's ability to produce. Producing a good with close substitutes is a determinant of the elasticity of DEMAND, since substitutes give buyers somewhere else to go, and it says nothing about how fast the firm can change its output.
Question 3
Which factor can influence the price elasticity of supply of a product?
Answer: B.
Price elasticity of supply asks how easily producers can change the quantity they offer when the price moves, so everything that matters is on the production side. Spare capacity is the clearest determinant of all: a firm with idle machines and workers can raise output almost at once, while a firm already running flat out cannot respond until it invests, so supply is elastic in the first case and inelastic in the second. A, C and D all belong to the demand side of the market. The degree of necessity and the proportion of income spent on a product determine how willing BUYERS are to go without it, and the price of substitutes determines where those buyers would go instead, so all three influence price elasticity of demand and none of them touches the producer's ability to expand output.
Question 4
What is the correct formula to calculate price elasticity of supply?
Answer: D.
Elasticity always asks how much the RESPONSE is relative to the CAUSE, so for price elasticity of supply the response is the quantity supplied and the cause is the price, which fixes both the order and the units. The formula is therefore the percentage change in quantity supplied divided by the percentage change in price. B inverts the fraction, which measures how much price must change to bring out a given quantity response and is the reciprocal of what was asked for. A and C each mix a percentage with an absolute change, and that is a mistake rather than a variant, because an absolute change carries units and the answer would then depend on whether output happened to be counted in tonnes or in kilograms.
Question 5
The price elasticity of supply of good X is 0.1. The good suddenly becomes very fashionable, leading to a large increase in demand. What would be the likely outcome of this change in the short term?
Answer: B.
A PES of 0.1 means supply barely responds to price, producers cannot expand output quickly in the short term. So when demand surges, the extra demand cannot be met with extra output and is absorbed almost entirely by the price, which rises sharply. Inelastic supply always means the adjustment falls on price rather than quantity; over time supply becomes more elastic and the price rise eases.
What this practice covers
These questions are drawn from past Cambridge IGCSE papers and filtered to price elasticity of supply (pes). You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on price elasticity of supply (pes), taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Giving PES a negative sign. It is normally positive.
- Confusing PES with PED, or applying the total revenue test to PES, that test belongs to PED.
- Saying "supply is inelastic" without saying over what time period.
- Mixing up spare capacity (ability to produce more) with stocks (goods already made).
- Calculating PES and then not explaining what it means.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Price elasticity of supply (PES) revision notes.