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Chapter 5: Q.19 (page 130)

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?

Short Answer

Expert verified

In short run the demand is more elastic and supply is more elastic in long run.

Step by step solution

01

Step 1. Introduction:

The elasticity of demand and supply is majorly influenced by the time period of the production process.

02

Step 2. Explanation:

Because it takes time to adjust output to supply extra or less of a commodity, demand is likely to be highly elastic in the short run. Supply, on the other hand, is anticipated to be highly elastic, as sellers have an almost limitless capability to modify supply in response to price changes.

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Most popular questions from this chapter

What is the formula for calculating elasticity?

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company鈥檚 product at the current price is 1.4, would you advise the company to raise the price, lower the price, or to keep the price the same? What if the elasticity were 0.6? What if it were 1? Explain your answer.

On a supply and demand diagram, show equilibrium price, equilibrium quantity and the total revenue received by the producers.

Why is the supply curve with constant unitary elasticity a straight line?

Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3%. What will happen to the demand for apples?
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