Econjess
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Can someone help me on Question 11 from 9708 paper 11 of May/June 2014 paper?
The diagram showed an elastic supply curve but the markscheme stated that the answer was PES diminishes as output increases...who can answer this?
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wizzerd15
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(Original post by Econjess)
Can someone help me on Question 11 from 9708 paper 11 of May/June 2014 paper?
The diagram showed an elastic supply curve but the markscheme stated that the answer was PES diminishes as output increases...who can answer this?
Moving up the PES curve means qty supplied rises as price rises (ceteris paribus). As s a result more resources/factors/inputs are used up for the production. As more resources are employed, it diminishes the firm's ability to respond quickly to any changes (in this case, rise in prices) in the future, thus the PES falls as output increases. Supply gradually becomes less elastic, i.e. PES falls. When resources are fully employed, you may notice that the PES curve is vertical, meaning it had become perfectly inelastic.

Hope this answers your question.
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wizzerd15
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Moving up the PES curve means qty supplied rises as price rises (ceteris paribus). As s a result more resources/factors/inputs are used up for the production. As more resources are employed, it diminishes the firm's ability to respond quickly to any changes (in this case, rise in prices) in the future, thus the PES falls as output increases. Supply gradually becomes less elastic, i.e. PES falls. When resources are fully employed, you may notice that the PES curve is vertical, meaning it had become perfectly inelastic.

Hope this answers your question.
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