Syllabus: Pearson - Pearson - A Level Economics
Module: 1.2 How Markets Work
Lesson: 1.2.5 Elasticity of Supply
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Introduction
The concept of price elasticity of supply (PES) sits at the heart of microeconomics and forms a core part of Pearson Edexcel’s A Level Economics Theme 1: Introduction to markets and market failure. It’s essential for students to understand how and why producers respond differently to price changes, depending on constraints like time, technology and resource availability.
Understanding PES empowers students to think like economists—analysing not just what happens in markets, but why. It also builds the quantitative and diagrammatic confidence that exams demand and that real-world applications expect.
Key Concepts
Students should be able to:
Define price elasticity of supply (PES) and understand what it measures.
Use the PES formula:
PES=% change in quantity supplied% change in price\text{PES} = \frac{\%\ \text{change in quantity supplied}}{\%\ \text{change in price}}PES=% change in price% change in quantity suppliedInterpret PES values:
Perfectly inelastic (PES = 0): Quantity supplied doesn’t change with price.
Relatively inelastic (0 < PES < 1)
Unit elastic (PES = 1)
Relatively elastic (PES > 1)
Perfectly elastic (PES = ∞)
Identify the factors affecting PES:
Spare production capacity
Stock levels
Time period (short run vs long run)
Flexibility and mobility of factors of production
Production lead times
Distinguish between the short run (at least one fixed input) and long run (all inputs variable), and explain how this affects supply responsiveness.
Real-World Relevance
Elasticity of supply isn’t just a theoretical curiosity—it’s a powerful lens for understanding market behaviour.
Take the global chip shortage of 2021–2022. Supply was highly inelastic in the short term due to fixed capital and production cycles, which meant even small demand increases caused large price spikes. Compare that to the fashion industry, where fast-fashion retailers like Zara have short lead times and flexible production, making supply more elastic.
Closer to home, consider how UK farmers respond to sudden changes in food prices. The elasticity of supply for strawberries is very different from wheat—not just due to shelf life, but because of seasonal labour availability, land use, and machinery flexibility.
These cases give students concrete examples of how PES shapes markets they see every day.
How It’s Assessed
Elasticity of supply appears in Paper 1: Markets and Business Behaviour and potentially Paper 3, where cross-theme analysis is tested.
Students may face:
Short-answer calculation questions:
“Calculate the PES when the price rises from £10 to £12 and quantity supplied increases from 100 to 120.”
Diagram-based questions:
Drawing and labelling PES curves, showing steep or flat gradients for different elasticity levels.
Data response or extended open-response questions:
“Discuss why the supply of electric vehicles might be relatively inelastic in the short run.”
Common command words include:
Calculate
Explain
Analyse
Evaluate
Mark schemes reward precise use of economic terminology, logical chains of reasoning, and well-labelled diagrams.
Enterprise Skills Integration
This topic is a natural fit for skills like:
Problem solving: Understanding how businesses adjust their output strategies in response to market conditions.
Decision making: Evaluating whether a firm should invest in flexible production methods to make its supply more elastic.
Critical thinking: Judging how elasticity influences strategic responses in volatile markets (e.g. energy, tech).
Classroom simulations—like role-playing supplier decisions with different constraints—bring the concept to life while embedding enterprise thinking.
Careers Links
Elasticity of supply connects directly to multiple career pathways:
Economist or Policy Analyst: Evaluating supply constraints across sectors.
Supply Chain Manager: Managing responsiveness and lead times.
Business Strategy Consultant: Advising firms on investment decisions based on market flexibility.
Logistics and Operations Roles: Understanding how timing, stock control and distribution affect PES.
Supports Gatsby Benchmark 4 (linking curriculum learning to careers) and 5 (encounters with employers), especially when reinforced with guest speakers from logistics, agriculture, or manufacturing.
Teaching Notes
What works:
Use concrete examples like housing, agriculture, and tech manufacturing to anchor abstract concepts.
Introduce interactive elasticity simulations (e.g. paper plane factories with different constraints).
Model real-world decision-making scenarios that mirror exam-style analysis.
Common pitfalls:
Students often confuse PES with PED—reinforce the producer vs consumer angle.
Diagrams sometimes lack clarity—focus on correct labelling and gradients.
Over-reliance on memorised definitions without context—bring in real data to ground understanding.
Extension ideas:
Compare elasticity of supply in different economic systems or countries.
Explore the impact of government policy (e.g. subsidies, regulations) on PES.
Investigate how technological change shifts supply responsiveness over time.