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In: Economics

Why is the short run supply curve relatively more inelastic than the long run supply curve?

Why is the short run supply curve relatively more inelastic than the long run supply curve?

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Expert Solution

Time period available with respect to production process determines the ability of a producer to change the factors of production and there by change the output produced and supply.

Short-run is referred to as the time period with respect to production in which producer do not have sufficent time to change all factors of production, producer can change some factors of production while has to keep others fixed.

On the other hand, long-run is referred to as the time period with respect to production in which producer has the sufficient time to change all factors of production.

This enables the producer to change the supply in greater magnitude in response to change in price in long-run relative to short-run.

So, in short-run, supply can be changed in smaller magnitude with respect to change in price in comparison to long-run.

When Supply is changed in smaller magnitude with respect to change in price, supply is said to be inelastic.

Therefore, the short run supply curve is relatively more inelastic than the long run supply curve.

Rahul Sunny answered 2 years ago
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