What is the difference between short-run price elasticity of supply and long-run price elasticity of supply in relation to the time period of resource allocation?

What is the difference between short-run price elasticity of supply and long-run price elasticity of supply in relation to the time period of resource allocation?

The difference between short-run price elasticity of supply and long-run price elasticity of supply lies in the time period of resource allocation.

Short-run price elasticity of supply refers to the responsiveness of quantity supplied to a change in price in the short run, where the time period is relatively fixed and resources cannot be easily adjusted. In the short run, firms have limited flexibility to increase or decrease their production levels due to fixed factors of production, such as capital and plant size. Therefore, the short-run price elasticity of supply tends to be relatively inelastic, meaning that the quantity supplied does not change significantly in response to price changes.

On the other hand, long-run price elasticity of supply refers to the responsiveness of quantity supplied to a change in price in the long run, where all factors of production can be adjusted. In the long run, firms have the flexibility to adjust their production levels by changing the quantities of all inputs, including labor, capital, and technology. As a result, the long-run price elasticity of supply tends to be more elastic, meaning that the quantity supplied can change significantly in response to price changes.

In summary, the difference between short-run and long-run price elasticity of supply is based on the time period of resource allocation. Short-run elasticity is limited by fixed factors of production, while long-run elasticity considers the flexibility to adjust all factors of production.