Key terms
- Price elasticity of supply
- The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price.
- Slope
- The slope is the rate of change in units along the curve, the change in price over the change in quantity.
Each percentage change is measured from the starting value
Elasticity is a ratio of one percentage change to another, nothing more. To turn a change into a percentage, divide it by the value before the change and multiply by 100. A rise in price from £4 to £5 is a change of £1 on a start of £4, so 25 per cent, not the 20 per cent you get by dividing by the new price. Do the same for quantity supplied, then put quantity on top and price underneath.