How do external events, like natural disasters, impact the PES of certain goods?

External events like natural disasters can significantly decrease the price elasticity of supply (PES) for certain goods.

Price elasticity of supply (PES) measures the responsiveness of the quantity supplied of a good to a change in its price. In the context of external events such as natural disasters, the PES of certain goods can be greatly affected. Natural disasters can disrupt the production process, damage infrastructure, and cause labour shortages, all of which can reduce the ability of suppliers to respond to price changes, thus decreasing the PES.

For instance, consider a country that heavily relies on agriculture. A severe drought or flood can damage crops, reducing the amount of produce available for supply. Even if prices increase due to the reduced supply, farmers cannot immediately respond by increasing production because growing crops takes time. This situation illustrates a decrease in PES as suppliers are unable to quickly adjust their production in response to price changes.

Similarly, in the case of goods produced using specific infrastructure, such as oil or minerals, a natural disaster could damage extraction or processing facilities. This would limit the ability of suppliers to increase production in response to price increases, again leading to a decrease in PES.

Moreover, natural disasters can also cause labour shortages, either because workers are directly affected by the disaster, or because they are diverted to aid in recovery efforts. This can further limit the ability of suppliers to respond to price changes, particularly in labour-intensive industries.

However, it's important to note that the impact of natural disasters on PES can vary depending on the nature of the good and the specific characteristics of the disaster. For example, goods that can be stored for long periods, such as canned food or bottled water, may see less of a decrease in PES following a disaster, as suppliers can draw on existing stocks to increase supply in response to price changes.

In conclusion, while the specific impact can vary, natural disasters generally decrease the PES of affected goods by disrupting production processes, damaging infrastructure, and causing labour shortages.