When a change in price causes an equal percentage change in the quantity supplied (PES = 1), this is called:

• A. Unit Price Elasticity of Supply
• B. Perfectly Elastic Supply
• C. Perfectly Inelastic Supply
• D. Elastic Supply

Answer: (A)

The main idea is how much producers change the quantity they supply when the price changes, which is measured by price elasticity of supply. If a price change leads to the same percentage change in quantity supplied, the elasticity of supply is 1. This is called unit elastic supply (or unitary elasticity). It means producers respond proportionally to price moves, not with a huge swing (which would be elastic) or with little or no response (which would be inelastic). The other terms describe different levels of responsiveness: perfectly elastic is an infinite response, perfectly inelastic is no response, and simply “elastic” typically means a response greater than a one-to-one percentage change but not necessarily equal to 1. Therefore, the described situation is unit price elasticity of supply.