Syllabus: Pearson - AS Level Economics
Module: 1.2 How Markets Work
Lesson: 1.2.5 Elasticity of Supply

Introduction

Elasticity of supply sits at the heart of understanding how responsive producers are to changes in market price. In the Pearson Edexcel AS Level Economics A specification (Theme 1: Introduction to Markets and Market Failure), topic 1.2.5 outlines this concept in practical and assessable terms. It’s not just about graphs and formulae—it helps students make sense of everything from housing shortages to fast-fashion trends. For teachers, this topic offers a great chance to bridge textbook theory with real economic dynamics students see daily.

Key Concepts

According to the Pearson Edexcel specification, students must be able to:

• Define price elasticity of supply (PES).

• Use and apply the PES formula:
  PES = % change in quantity supplied / % change in price

• Interpret PES values:

  • Perfectly inelastic (PES = 0)

  • Relatively inelastic (0 < PES < 1)

  • Unitary elasticity (PES = 1)

  • Relatively elastic (PES > 1)

  • Perfectly elastic (PES = ∞)

• Understand the determinants of PES, including:

  • Availability of stock

  • Spare production capacity

  • Ease and cost of factor substitution

  • Time period (short run vs long run)

These concepts provide the analytical toolkit students need to explain producer behaviour under different market conditions.

Real-World Relevance

Elasticity of supply isn’t theoretical—it’s what determines whether shelves stay stocked during a spike in demand or if prices soar. Here are some examples:

1. Housing Market in Urban Areas
In cities like London or Manchester, new housing supply is notoriously inelastic in the short run. Even if property prices rise sharply, planning regulations, land availability, and construction timelines limit how quickly supply can respond.

2. Face Masks during COVID-19
In early 2020, face masks became essential overnight. Supply was highly inelastic at first—factories weren’t ready, supply chains were strained. Over time, production ramped up, showing greater elasticity in the long run.

3. Seasonal Agriculture
Strawberries, for instance, have a relatively inelastic supply in the short run. Farmers can’t suddenly grow more mid-season, regardless of rising prices. Longer term, greenhouse methods or imports can change the picture.

These examples help students see that elasticity shapes not just prices, but who gets access to goods and services—and when.

How It’s Assessed

Elasticity of supply often features in Paper 1 (Markets and Business Behaviour) through:

• Data-response questions: students may be asked to interpret supply responsiveness using contextual data.

• Short-answer calculations: calculating PES using percentage changes.

• Diagram-based questions: drawing and interpreting supply curves with different elasticity levels.

• Extended evaluation: explaining the implications of elasticity for government policy or business decisions.

Command words to watch out for:

• Calculate – apply the PES formula accurately.

• Explain – give reasons for variations in elasticity.

• Analyse – explore the impact of elasticity on supply-side behaviour.

• Evaluate – weigh up the effects of supply responsiveness in different contexts.

Exam technique tip: remind students that elasticities aren’t just numbers—they’re stories about what producers can or can’t do when prices move.

Enterprise Skills Integration

This topic is perfect for building economic thinking and enterprise skills:

• Decision-making: Students weigh up constraints on supply decisions in various industries.

• Problem-solving: Investigating how firms might increase their supply elasticity (e.g. adopting tech or diversifying inputs).

• Critical thinking: Comparing how different markets react to shocks, from food to tech products.

• Numeracy: Calculating and interpreting PES values with confidence.

A simple classroom task: Ask students to rank real-life products (like smartphones, concert tickets, handmade jewellery) by their likely PES, justifying their decisions with reasoning, not just instinct.

Careers Links

Understanding elasticity links directly to multiple Gatsby Benchmarks:

• Benchmark 4: Linking curriculum learning to careers

• Benchmark 5: Encounters with employers and employees

• Benchmark 6: Experiences of workplaces

Relevant careers include:

• Supply chain analyst: analysing how quickly goods can be moved or manufactured.

• Economist: advising government or business on market shocks.

• Business development manager: assessing operational flexibility in response to demand.

• Policy adviser: shaping interventions like subsidies or planning laws based on supply responsiveness.

Bring this to life with a case study: ask students how supermarkets managed to keep shelves stocked during sudden demand spikes. What worked? What didn’t?

Teaching Notes

Key tips:

• Use visual aids early: contrasting perfectly inelastic and perfectly elastic supply curves is a simple but effective starter.

• Connect to students’ own experiences: fashion trends, gaming consoles, festival tickets—markets they know.

• Emphasise the difference between short run and long run supply elasticity. Use industry examples to highlight this distinction.

Common pitfalls:

• Students often confuse elasticity of supply with demand. Reinforce the “producer side” language.

• Some struggle with interpreting values (e.g. what does a PES of 0.7 actually mean?). Use number lines and contextual scenarios.

Extension activity:
Set up a mini-debate: “Should governments intervene in markets where supply is inelastic?” Students can explore subsidies, stockpiling, or price caps through the elasticity lens.