hi we've got a price elasticity of supply you can learn it in exactly the same ways PD but just clearly enough--for supply very important that you've watched my previous video on PD therefore so PS measures the responsiveness of quantity supplied given a change in price here is the equation just like the PD equation but now supplied here so the percentage change in quantity supplied over the percentage change in price just remember you cube before you P remember that Q before you P will always make sure you go the right way around and remember if you've got wrong numbers and you want to convert them to percentage change there's the equation there the difference between two numbers divided by the original number x by a hundred we are always going to get a positive number when we compute PS and that's because of the law of supply when the price goes up quantity supplied will go up positive positive will give a positive number when the price goes down negative quantity supplied will go down negative a negative and a negative will give a positive number so will always have a positive number when we calculate PS because of the law of supply therefore the positive sign is irrelevant we can ignore that just look at the actual number when it comes to interpreting elasticity if that number is greater than the one it means supply is price elastic that means for any price change the change in quantity supplied will be proportionally greater than the change in price if the figure is less than one supplies price inelastic means that when the price changes the quantity supplied will change but proportionately less than the change in price if it's zero again two extreme territories now zero supply is perfectly price inelastic which means a regardless of the change in price quantity supply will never change infinity supplies perfectly price inelastic and once supplies unit price elastic so this is exactly the same way of interpreting the figures as with peb but it's important that we can use those confidently and you know use the right terminology when we do calculation let's do that now so the price of a barrel of oil increases from 40 pounds to 60 pounds let's convert that to change using this equation here so the difference is 20 divided by the original which is 40 times 100 that's a 50% increase in price quantity supply the increases from 150 280 barrels that's 30 divided by 150 times 500 that's a 20% increase in quantity supplied so put those two together do the calculation and we get a final PS figure leave the sign in okay so make sure you leave it in positive no point for naught point 4 that means supply is price inelastic and if we put the words to that what does it mean in this case it means that as the price of oil increases quantity supplied also increases but proportionately less unfortunately less than the increase in price that's the kind of wording you need to use okay so let's go back down and look at diagrams and determinants so have you draw supply curves when we know the price elasticity of supply well a supplier is price inelastic we draw a supply curve steep steep like that and that means for any given change in price the responsiveness of quantity supply will be proportionately less than the change in price if supply as price elastic we draw the supply curve quite shallow which means that when the price changes quantity supply will change more proportionately more than the change in price so draw a shallow for price elastic supply Android's steeper price inelastic supply when we get to the extremes perfectly price inelastic supply draw vertical perfectly price elastic supply draw horizontal it's exactly the same concept is already PD simple stuff so then what determines whether supply for a good or services price elastic or price inelastic just remember what noise is made when you open a kind of Coke or a kind of Pepsi it's a sound isn't it yeah you just gotta remember that there were three yeses in that it felt this really funny story of how I came up with this I was teaching PS to my brother and we came to determine it and he could not remember the list he would always remember the idea once he knew the determinant but he would always forget something in the list so then he said look mister doll right yeah because that's what used to call me it says come on you know you come up with all these memory devices work one out or PS determinants laughter but there are no vowels but give me five minutes I'll come out with something and I came up with and he absolutely loved it he always remembered every single determinant after that and so will you it's a very powerful one one of my favorites just think open any kind of Coke or Pepsi 3s is in there so the P stands for production lag the longer the production lag for a good or service the more price inelastic supply is going to be it's very hard to respond by increasing production if there is a long production that when the price goes up or when demand goes up where is that the production lag is very short is very easy to increase production so supply is more price elastic think the level of stocks okay so one of the essays is stocks the larger the level of stocks the more price elastic supplies is going to be it's very easy to respond to an increase in price or an increase in demand if you've got lots of stocks that lower your level of stocks the more price inelastic supply is going to be think about spare capacity that a business has the more spare capacity the more price elastic supply is going to be because the price goes up or if demand increases and production needs to go up you can easily utilize your spare capacity whereas this spare capacity is low then PS is going to be inelastic supplies for me price inelastic think about the substitute ability of factors of production the more substitutable factors of production are in a given business the easier it is to respond by increasing production of the price goes up or when demand increases so the more substitutable factors of production are the more price elastic supply is so for example you've got a business making cars and vans let's say suddenly vans are in much high demand the business wants to increase their production events well if that factors our production our subs is usable they can move workers from making cars to making fans they can move capital machinery from making cars to making math so that explains it where is it the factors of production are not very substitute of all the supplies price inelastic and I mean look at time period again in the short-run supply is price inelastic whereas in the long-run supply is price inelastic mass because in the short run we say in economics there is at least one fixed factor of production usually to land and capital therefore in the short run it's very difficult to increase production supply is price inelastic because you can't vary your factors of production whereas in the long run in economics we say that all factors of production a variable so therefore it's much easier to increase or decrease production supply as pricey domestic so that covers PS thank you very much for watching guys see you in the next year last 60 video will be xev