An increase in the market price of men’s haircuts from $15 per haircut to $25 per...

An increase in the market price of men’s haircuts from $15 per haircut to $25 per haircut initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35 to 45. When the $25 market price remains unchanged for several weeks and all other things remain equal as well, the barbershop hires additional employees and provides 65 haircuts per day.
1. What do we expect will happen to the price elasticity of supply as we move from the short run to the long run? Explain.
2. Calculate the short-run price elasticity of supply.
1. Calculate the long run price elasticity of supply.

Do your results in (b) and (c) fit your answer in (a)? Explain how the barbershop’s actions, in the long run, resulted in this change in elasticity

Expert Solution

Rahul Sunny answered 2 years ago

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