Question

Price Elasticity of Supply: Why would there be a difference in price elasticity of supply for...

Price Elasticity of Supply:

Why would there be a difference in price elasticity of supply for a good in the short - run compared to long - run?

Homework Answers

Answer #1

A price elasticity of supply means how quickly the good will respond to the change in the price level. In the short run some of the variables that the firm used for input are fixed, that means the supply made by the firm will not increase much even if the price are very high making it inelastic.

But in the long run the firm can change all the variables used in the production, that enables them to utilize and produce more at a higher price, that increased supply in response to a change in the price makes the supply inelastic in the long run.

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