Economics Elasticity Of Supply Questions
The difference between short-run price elasticity of supply and long-run price elasticity of supply lies in the time horizon.
Short-run price elasticity of supply refers to the responsiveness of quantity supplied to a change in price in the short term, where the time horizon is relatively limited. In the short run, factors of production, such as labor and raw materials, are often fixed or have limited flexibility. As a result, it is difficult for firms to quickly adjust their production levels in response to price changes. Therefore, the short-run price elasticity of supply tends to be relatively inelastic, meaning that quantity supplied does not change significantly in response to price changes.
On the other hand, long-run price elasticity of supply considers the responsiveness of quantity supplied to a change in price over a longer time period, where all factors of production can be adjusted. In the long run, firms have more flexibility to adjust their production levels by, for example, hiring more workers or investing in new machinery. Consequently, the long-run price elasticity of supply is generally more elastic, meaning that quantity supplied can change more significantly in response to price changes.
In summary, the key difference between short-run and long-run price elasticity of supply is the time horizon and the flexibility of factors of production. Short-run elasticity is limited due to fixed or less flexible inputs, while long-run elasticity is higher as firms can adjust all inputs to respond to price changes.