Economics Elasticity Of Supply Questions
Price elasticity of supply refers to the responsiveness of the quantity supplied of a good or service to changes in its price. The concept of price elasticity of supply is closely related to the time horizon. In the short run, when the time horizon is relatively limited, the supply of a good or service is generally inelastic. This means that the quantity supplied is not very responsive to changes in price. This is because in the short run, producers may have limited capacity to adjust their production levels or inputs.
On the other hand, in the long run, when the time horizon is extended, the supply of a good or service becomes more elastic. This means that the quantity supplied is more responsive to changes in price. In the long run, producers have more flexibility to adjust their production levels, expand or contract their facilities, and make changes to their inputs. As a result, they can respond more effectively to changes in market conditions and adjust their supply accordingly.
Overall, the concept of price elasticity of supply in relation to the time horizon highlights the importance of considering the flexibility and responsiveness of producers in adjusting their supply in different time periods.