Economics Elasticity Of Supply Questions
Price elasticity of supply refers to the responsiveness of the quantity supplied of a good or service to a change in its price. It measures the percentage change in quantity supplied divided by the percentage change in price.
In relation to the time period of decision-making, the concept of price elasticity of supply varies. In the short run, when the time period is relatively brief, the supply of a good or service is generally inelastic. This means that the quantity supplied is not very responsive to changes in price. In the short run, producers may have limited ability to adjust their production levels due to fixed factors of production, such as capital or specialized labor.
On the other hand, in the long run, when the time period is more extended, the supply of a good or service tends to be 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 by varying all factors of production, including capital, labor, and technology.
Overall, the time period of decision-making influences the price elasticity of supply. In the short run, supply is relatively inelastic, while in the long run, supply becomes more elastic.