Economics 202 Summerl18 lomework Chapter 2 Homework 0 of 1 p

Economics 202 Summerl\'18 lomework: Chapter 2 Homework 0 of 1 pt 70f 10 ( core: eview Question 6 Why do long-run elasticities of demand differ from short-run elasticities? Long-run elasticities of demand differ from short-run elasticities because O A. durable goods last a relatively long time. B. it takes time for consumers to respond to price changes. C. firms may be constrained in the short run by production capacity. O D. both A and B are correct. O E. all of the above. Click to select your answer and then click Check Answer. remaining Clear javascript:doExercise(4) 16

Solution

The elasticity is the measure of change in responsiveness of quantity demanded/change in its price.

The long run elasticity of demand will differ from the short run as

in case of non durable goods,the price change will cause a dramatic change in its demand whereas the non durable goods will have relatively less elastic in the short run vs in the long run when more substitutes are available.

In the short run,firms are constrained by their production capacity which they can change in the long run and by increasing the capacity of production have a larger long run price elasticty.

Also,it takes time for people to respond to price changes,the longer the time frame,the more time is available to respond to change in prices.In the short run,the elasticity will be inelastic but in the long run,the consumer can switch to alternatives thus,the it being more elastic.

Therefore option (E) all of the above