Describe the concept of perfectly inelastic supply.

Perfectly inelastic supply refers to a situation in which the quantity supplied of a good or service remains constant regardless of changes in its price. In other words, the supply of a perfectly inelastic good or service does not respond to price changes at all.

There are several factors that can lead to perfectly inelastic supply. One such factor is the availability of inputs. If the production of a good or service requires a fixed amount of inputs that cannot be easily increased or decreased, then the supply will be perfectly inelastic. For example, if a certain type of rare gemstone can only be found in limited quantities, the supply of that gemstone will be perfectly inelastic because no matter how high the price goes, the quantity supplied will remain the same.

Another factor that can result in perfectly inelastic supply is time. In the short run, some goods or services may have a fixed supply that cannot be adjusted quickly. For instance, if a farmer has already planted a certain number of apple trees for the current season, the supply of apples will be perfectly inelastic until the next planting season. Even if the price of apples increases significantly, the farmer cannot increase the supply until the next harvest.

Perfectly inelastic supply can also occur when there are legal or regulatory constraints on production. For example, if the government imposes a quota on the production of a certain good, the supply of that good will be perfectly inelastic because it cannot be increased beyond the quota, regardless of the price.

In the case of perfectly inelastic supply, the price elasticity of supply (PES) is zero. This means that the percentage change in quantity supplied is zero, regardless of the percentage change in price. The PES formula, which is the percentage change in quantity supplied divided by the percentage change in price, will always yield zero in this scenario.

It is important to note that perfectly inelastic supply is a theoretical concept and rarely exists in the real world. Most goods and services have some degree of elasticity, meaning that the quantity supplied responds to changes in price to some extent. However, understanding the concept of perfectly inelastic supply helps economists analyze and predict the behavior of markets and the impact of price changes on supply.