Explain the difference between the immediate market period, the short run, and the long run as they relate to price elasticity of supply
Please provide the best answer for the statement.
The price elasticity of supply depends primarily on the ease of substitution of resources between alternative uses, which is often affected by time. In the immediate market period, there is too little time for producers to change output in response to a change in price. As a consequence supply is perfectly inelastic. Graphically, this means that the supply curve is vertical at that market level of output. In the short run, producers have less flexibility to change output in response to a change in price because they have fixed inputs that they cannot change. They have only limited control over the range in which they can vary their output. As a consequence, supply is price inelastic in the short run. In the long run, producers can make adjustments to all inputs to vary production. As a consequence, supply is price elastic in the long run.
You might also like to view...
Refer to Figure 12-5. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens in the diagram above?
A) Only the average variable cost and average total cost curves shift upward; marginal cost is not affected. B) All the cost curves shift upward. C) Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected. D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.
Behavioral economics is an approach to the study of consumer behavior
A) that emphasizes psychological limitations and complications that potentially interfere with rational decision making. B) that emphasizes the capabilities of individuals to succeed in attaining all their unlimited wants utilizing limited resources. C) that, in contrast to standard approaches in economics, utilizes the ceteris paribus assumption. D) that, in contrast to standard approaches in economics, relies on real-world data to evaluate the usefulness of economic models.