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Question
Macroeconomics
Posted 7 months ago
Farmers can easily grow raspberries or strawberries in the same soil using the same inputs and achieve the same output per acre in pounds.
All else equal, what is the value of the relative price elasticity of supply of raspberries over two days or two years?
Choose 1 answer:
(A) relatively inelastic in two days; relatively inelastic in two years
(B) relatively more elastic in two days than in 2 years
(c) relatively inelastic in two days; relatively elastic in two years
(D) relatively elastic in two days; relatively inelastic in two years
(E) relatively more inelastic in two years than in two days
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Answer from Sia
Posted 7 months ago
Solution
a
Understanding Price Elasticity of Supply: The price elasticity of supply measures how much the quantity supplied of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity supplied divided by the percentage change in price
b
Timeframe and Elasticity: Generally, the elasticity of supply can vary over different timeframes. In the short term, producers may not be able to increase production due to fixed inputs or capacity, making the supply relatively inelastic. Over a longer period, producers can adjust their production processes and inputs, making the supply more elastic
c
Applying the Concept to Raspberries: Given that farmers can switch between growing raspberries and strawberries with the same inputs and achieve the same output, the long-term flexibility to change production implies that the supply of raspberries would be more elastic over two years than over two days. In the short term (two days), there is less flexibility to adjust production, making the supply inelastic
Answer
C. relatively inelastic in two days; relatively elastic in two years
Key Concept
Price Elasticity of Supply Over Different Timeframes
Explanation
The supply of raspberries is more elastic over two years than over two days because farmers have more time to adjust their production in response to price changes
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