Why is time such an important determinant in the elasticity of supply? Is time also important in determining price elasticity of demand? Explain
What will be an ideal response?
Time is an important determinant in the elasticity of supply because more resources can flow into or out of production of a good the greater the time period allowed for supply to adjust to price changes. In the short run, some inputs are fixed so firms cannot make all the adjustments they would like to make. In the long run, all adjustments can be made so quantity supplied will be more responsive to a change in price. Time is also important for determining price elasticity of demand. Again, people have more time to adjust to new situations, and more time to find substitutes for the good.
You might also like to view...
If inflation is completely anticipated,
A) lenders lose in the economy. B) borrowers lose in the economy. C) firms lose because they incur menu costs. D) no one loses in the economy.
The term frictional unemployment refers to persons who are out of work
A. due to technological change. B. due to strikes or lockouts. C. and have given up looking for work. D. because they are between jobs.
The demand curve for money curve shows, all other things unchanged, the
A) quantity of money demanded at each price. B) quantity of money demanded at each bond rate. C) quantity of money demanded at each interest rate. D) amount of money people demand at a specific interest rate.
The figure below represents the U.S. market for steel imports from South Korea. The South Korean government provides an export subsidy of $25 per ton, and South Korean firms use the subsidy to reduce their export price to the United States to $375 per ton.
The change in national welfare in the United States when the South Korean government provides an export subsidy of $25 per ton is
A. + $375 million. B. + $4.125 billion. C. -$4.5 billion. D. - $3.75 billion.