Define the price elasticity of supply. Explain why the price elasticity of supply might be different in the long run than in the short run.
Price elasticity of supply measures the relationship between change in quantity supplied with the change in price.It shows the reponsiveness of quantity supplied to a change in price.
Elasticity of supply = (%change in quantity supplied / % change in price)
Price elastcity of supply is different in the long run than in the short run because producers find it easier to expand production in the long run . In the short run , it can be costly or difficult to hire new workers, build new factory. But in the long run , it can be done. In short run , prices fluctuate more (up or down) than quantities but in the long run quantities fluctuate more than prices. Supply is often inelastic in the short run and elastic in the long run.
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