Price elasticity of supply (PES)

Price elasticity of supply (PES) shows how much the price change impacts the quantity of a product or service suppliers are willing to offer. 

It is calculated by dividing the percentage change in quantity supplied by the percentage change in price. For example, a tour operator increases the cost of a guided city tour from $50 to $60 (a 20 percent increase). As a result, more tour guides are ready to provide their services, increasing the number of available tours from 100 to 130 per week (a 30 percent increase). Dividing 30 by 20 results in 1.5.

Similar to price elasticity of demand, a PES of greater than 1 indicates elasticity, where suppliers can quickly increase availability or produce more goods in response to price rises. A PES of less than 1 means inelasticity, where providers struggle to scale up quickly, possibly due to limited resources or capacity.