Study Notes
Elasticity of Supply: Inside The World's Biggest Baked Bean Factory
- Level:
- AS, A-Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 23 Nov 2018
Here is a terrific short video that takes us into a baked bean factory capable of producing over two million cans a day through a two hour production process. The beans are cooked in the tin! This is a stunning example of capital-intensive production leading to constant cost supply i.e. a perfectly elastic supply during routine manufacturing.
Key summary notes on price elasticity of supply
- If supply is elastic, then producers can increase their output without a rise in cost or a time delay
- If supply is inelastic, then firms find it hard to change their production in a given time period
The formula for price elasticity of supply is:
% change in quantity supplied divided by the % change in price
- When Pes > +1, then supply is price elastic
- When Pes < +1, then supply is price inelastic
- When Pes = 0, supply is perfectly inelastic
- When Pes = infinity, supply is perfectly elastic following a change in demand
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