Suppose the price elasticity of supply for cheese is 0.6 in the short run and 1.4 in the long run.If an increase in the demand for cheese causes the price of cheese to increase by 15%,then the quantity supplied of cheese will increase by
A)0.4% in the short run and 4.6% in the long run.
B)1.7% in the short run and 0.7% in the long run.
C)9% in the short run and 21% in the long run.
D)25% in the short run and 10.7% in the long run.

Question

Quizplus · Accepted Answer

We can use the formula for percentage change in quantity supplied:
%ΔQs = %ΔP x elasticity of supply

For the short run:
%ΔQs (short run) = 0.15 x 0.6 = 0.09 or 9%

For the long run:
%ΔQs (long run) = 0.15 x 1.4 = 0.21 or 21%

Therefore, the correct answer is C) 9% in the short run and 21% in the long run.

Suppose the Price Elasticity of Supply for Cheese Is 0