Which statement describes unit price elasticity of supply?

Which statement describes unit price elasticity of supply?

• A. PES equals zero
• B. PES equals infinity
• C. PES equals one
• D. PES greater than one

Answer: (C)

Unit price elasticity of supply measures how responsive producers are to a change in price. It is the percentage change in quantity supplied divided by the percentage change in price. When this value is one, a 1% rise in price leads to a 1% rise in quantity supplied (and a 1% fall leads to a 1% fall), showing a proportional response. That is why the statement PES equals one best describes unit price elasticity of supply. If PES were zero, quantity supplied would not change with price (perfectly inelastic). If PES were infinity, quantity supplied would change by an infinite amount with a tiny price change (perfectly elastic). If PES is greater than one, supply is elastic but not exactly proportional.

Unit price elasticity of supply measures how responsive producers are to a change in price. It is the percentage change in quantity supplied divided by the percentage change in price. When this value is one, a 1% rise in price leads to a 1% rise in quantity supplied (and a 1% fall leads to a 1% fall), showing a proportional response. That is why the statement PES equals one best describes unit price elasticity of supply. If PES were zero, quantity supplied would not change with price (perfectly inelastic). If PES were infinity, quantity supplied would change by an infinite amount with a tiny price change (perfectly elastic). If PES is greater than one, supply is elastic but not exactly proportional.