Syllabus: Cambridge - IGCSE Economics
Module: 2.8 Price Elasticity of Supply (PES)
Lesson: 2.8.1 Definition of PES

Introduction

This article supports the teaching of Cambridge IGCSE Economics, specifically Section 2.8.1 of the syllabus: Definition of Price Elasticity of Supply (PES). The topic introduces students to a core economic concept that underpins how firms respond to changing market conditions. Understanding PES equips learners with commercial literacy—key to analysing real business decisions and evaluating market behaviour.

For teachers, careers leads, and SLT, this unit provides a high-value opportunity to align curriculum delivery with career readiness by connecting economic theory to enterprise thinking and Gatsby Benchmark 4.

Key Concepts

The Cambridge IGCSE Economics syllabus defines PES as:
“A measure of the responsiveness of quantity supplied to a change in price.”

Key elements for this section include:

• Definition: PES = % change in quantity supplied ÷ % change in price.

• Range of values:

  • Perfectly inelastic (PES = 0)

  • Inelastic supply (PES < 1)

  • Unit elastic supply (PES = 1)

  • Elastic supply (PES > 1)

  • Perfectly elastic (PES = ∞)

• Interpretation: A high PES means producers can respond quickly to price changes (e.g. manufactured goods), while a low PES indicates a slower response (e.g. agricultural goods).

• Influencing factors:

  • Time period (short vs long run)

  • Availability of resources

  • Spare production capacity

  • Flexibility of production

  • Stock levels

Students are expected to be able to define PES, interpret elasticity values, and understand what affects supply responsiveness.

Real-World Relevance

Price Elasticity of Supply is not just theoretical—it explains how businesses adapt in uncertain or dynamic markets. For example:

• Agricultural products: After a drought, farmers can’t instantly increase supply—PES is low.

• Face mask production in 2020: Firms with flexible production lines ramped up output rapidly—PES was high.

• Housing market: Supply of new homes is constrained by planning laws and construction timelines, making supply inelastic in the short term.

These examples help students link abstract calculations to industry behaviour and decision-making.

How It’s Assessed

In Cambridge IGCSE exams, this topic typically appears in Section 2: The allocation of resources. Assessment may include:

• Multiple choice: Identify the correct elasticity range or formula.

• Short answer: Define PES and explain influencing factors.

• Structured questions: Interpret diagrams or data and explain the implications of elastic/inelastic supply.

• Command words: “Define”, “Explain”, “Calculate”, “Analyse”, and “Evaluate” are commonly used.

Mark schemes reward precise definitions, accurate use of formulae, real-life examples, and application of reasoning to given contexts.

Enterprise Skills Integration

PES lends itself naturally to applied problem-solving and commercial awareness:

• Decision-Making: Students assess how firms adjust output in response to price movements.

• Scenario Analysis: What happens if raw material costs spike? Can the firm scale production?

• Strategic Thinking: Which sectors benefit from high elasticity? What are the risks of low PES?

Enterprise Skills simulations and classroom challenges (e.g. adjust supply chain in response to demand shifts) help embed this thinking through active learning.

Careers Links

This topic links directly to workplace readiness and multiple Gatsby Benchmarks:

• Benchmark 4: Linking curriculum to careers—PES applies to roles in logistics, operations, procurement, and agriculture.

• Benchmark 5: Real-world case studies from employers in retail, manufacturing, or construction.

• Benchmark 6: Simulated workplace decisions (e.g. responding to market shocks) replicate real challenges.

Careers pathways:

• Supply Chain Analyst – Evaluates how firms respond to demand changes.

• Logistics Coordinator – Balances inventory and responsiveness.

• Production Planner – Determines how supply can be scaled in response to price signals.

• Economist/Policy Advisor – Considers how supply constraints affect inflation and markets.

Teaching Notes

Tips for delivery:

• Start with intuitive examples (e.g. can a bakery instantly double output?).

• Use graph sketching tasks to show steep vs flat supply curves.

• Integrate mini case studies (e.g. face masks during COVID) for relatability.

• Reinforce the formula with worked examples and ‘spot the mistake’ peer checks.

Common pitfalls:

• Students often confuse PES with Price Elasticity of Demand (PED). Reinforce that PES concerns suppliers, not consumers.

• Misinterpreting values (e.g. thinking a PES of 2 means inelastic supply).

Extension ideas:

• Run a simulation where students manage a fictional company and must react to price changes with varying supply chain constraints.

• Ask students to research a real product and estimate whether its supply is elastic or inelastic, justifying with reasoning.

Recommended Enterprise Skills Tools:

• Skills Hub Futures – Sessions like Understanding Business Models and Data-Driven Decisions help contextualise PES through enterprise lenses.

• Simulation events – Allow students to experience supply-side pressures in real time, building strategic awareness and workplace confidence.