Syllabus: Cambridge - IGCSE Economics
Module: 2.8 Price Elasticity of Supply (PES)
Lesson: 2.8.2 calculation of PES
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Introduction
This article aligns with Cambridge IGCSE Economics (0455), specifically unit 2.8.2: Calculation of Price Elasticity of Supply (PES). PES is a critical concept for students to grasp the responsiveness of quantity supplied to a change in price. It links directly to real-world resource allocation, production planning, and commercial responsiveness — all key themes in both economics education and workplace readiness.
This section of the syllabus builds students’ quantitative and analytical thinking and supports wider skills such as decision-making and commercial awareness. It provides clear opportunities for Gatsby Benchmark 4 alignment by linking curriculum content to career competencies like data analysis and supply chain planning.
Key Concepts
According to the Cambridge IGCSE Economics syllabus, students are expected to:
Define Price Elasticity of Supply (PES): The responsiveness of quantity supplied to a change in price.
Calculate PES using the formula:
PES=%change in quantity supplied%change in price\text{PES} = \frac{\% \text{change in quantity supplied}}{\% \text{change in price}}Interpret PES values:
PES > 1: Elastic supply
PES < 1: Inelastic supply
PES = 1: Unitary elasticity
PES = 0: Perfectly inelastic
PES = ∞: Perfectly elastic
Understand the factors affecting PES, such as:
Time period (short-run vs long-run)
Availability of resources
Spare production capacity
Ease of storing stock
Mobility of factors of production
This content supports cross-curricular skill development in maths (percentage change calculations) and builds foundations for future learning in business and economics at A Level.
Real-World Relevance
In practice, PES plays a crucial role in how businesses respond to market shifts. For example:
Agriculture: The supply of crops is generally inelastic in the short term. Even if prices rise, farmers can’t instantly grow more.
Manufacturing: A tech company with flexible production lines may exhibit highly elastic supply — able to ramp up output quickly when prices rise.
Global Events: The semiconductor chip shortage (2020–2022) is a real-world example where PES was extremely inelastic in the short run, leading to production delays in cars, laptops, and mobile phones.
These case studies offer meaningful ways for students to relate theory to practice, enhancing their commercial literacy and awareness of global market dynamics.
How It’s Assessed
In the Cambridge IGCSE exam, students may encounter PES through:
Short-answer calculations: “Calculate the PES given a change in price and quantity supplied.”
Data interpretation: Candidates might be given supply data and asked to calculate PES or assess elasticity based on figures.
Extended writing: “Explain how the elasticity of supply affects a firm’s ability to respond to a change in price.”
Command words to emphasise during teaching:
Calculate — requires correct formula use and working.
Explain — students must link theory to real-world impact.
Analyse — requires depth in exploring cause and effect of PES on markets or producers.
Assessment objectives focus on both knowledge and application, making real examples a valuable revision aid.
Enterprise Skills Integration
Understanding and calculating PES strengthens several workplace-ready competencies:
Decision-Making & Problem-Solving: Interpreting elasticity helps learners make judgements about capacity planning or market entry strategies.
Commercial Awareness: Students begin to appreciate how firms respond to pricing pressures — a critical skill in any commercial role.
Numeracy in Context: Percentage change calculations enhance practical data handling aligned with real economic applications.
Simulated business scenarios from Enterprise Skills’ Skills Hub tools can reinforce these concepts. For example, students may act as supply chain managers responding to market price shifts, using PES as part of their justification.
Careers Links
This topic provides an ideal opportunity to connect curriculum learning to careers — delivering on Gatsby Benchmark 4.
Relevant career pathways:
Supply Chain Analyst – Evaluating responsiveness of supply to price and external shocks.
Economist – Modelling elasticity in policy or business forecasting.
Retail Operations Manager – Managing stock and pricing strategy using elasticity insights.
Through Skills Hub Futures, students can engage in activities like “Understanding Business Models” and “Data-Driven Decisions” — directly mapping PES to workplace roles.
Teaching Notes
Tips for delivery:
Use simple analogies to explain elasticity — e.g. stretchiness of supply like a rubber band.
Include interactive calculation tasks — small group work using mini case studies (e.g. a bakery increasing supply of cupcakes when price rises).
Use graphical representations to contrast elastic and inelastic supply curves.
Common pitfalls:
Confusing PES with Price Elasticity of Demand (PED).
Forgetting to convert values to percentage changes.
Misinterpreting PES > 1 or < 1 as always good or bad — context matters.
Extension opportunities:
Encourage higher-ability students to evaluate policy implications, such as subsidies for supply expansion.
Introduce elasticity in long-run vs short-run contexts for real challenge.
Recommended resources:
Enterprise Skills Business Simulations — provide elasticity-focused tasks.
Active Learning strategies — peer teaching, mini whiteboard quizzes, and real-time data modelling have been shown to increase retention by 73% compared to traditional methods.
