Question

Would you expect a shift in supply to have a greater effect on equilibrium quantity in the short run or in the long run? Explain your answer. (multiple choice)

a.)The same effect on equilibrium quantity in the short run and the long run because when analyzing one good, it is predicted that elasticity does not change.

b.)A greater effect on equilibrium quantity in the long run because the longer the time period, the greater the increase in income and thus demand.

c.) A greater effect on equilibrium quantity in the long run because the longer the time period, the more elastic is the good’s demand.

Answer 1

Answer. C

A greater effect on equilibrium quantity in the long run because the longer the time period, the more elastic is goods demand. All Elasticities are greater, in the long run, compare to short-run because all changes like production expansion, technology change everything will be easier in a longer period than a short period. The short-run is full of changes like price, factor changes etc. Price changes are more than quantity means less elastic in the short run. But in the long run, de nd and supply quantity are more than price change means more elastic so that elasticities are greater in the long run. In the long run price fluctuations are easily manageable due to a long period of time.