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Just like the PED, there are determinants for PES as well.
So imagine you have a farm, and you are a farmer.
If I ask you to produce 100,000 tonnes of oranges
when you can only produce 10,000,
you’ll find it hard even if I increase the price.
That’s because you don’t have a lot of spare equipment,
you don’t have extra supplies of land,
and your orange trees simply cannot grow in time.
You simply cannot expand.
However, if you owned a factory producing iPad.
I ask you to produce 100,000 iPads
instead of 10,000 for this month. Simple!
You just have to churn your machinery more,
and since the spare parts are ready
and your workers can just work overtime,
you can easily meet the target.
So the first reason is your supply capabilities.
So for the farmer,
I’ll have to give you very huge price increases
to reap very little increase in quantity supplied.
For iPad, I don’t even need to offer you
a very large amount of money for you
to produce a lot more.
So the second reason is again, time period.
In the very short run, production capacity
is nearly fixed because the amount of raw materials
and equipment you have is rather limited.
In the long run you can acquire new technology,
have new equipments and import new raw materials.
Your supply will be a lot more price elastic.