If the short-term own price elasticity for food is estimated to be −0.4,then long-term own price elasticity is expected to be:
A) −0.4.
B) greater than −0.4.
C) less than −0.4.
D) neither greater than, less than, nor equal to −0.4.

Question

Quizplus · Accepted Answer

In the long-term, consumers can adjust their consumption patterns and find substitutes for the food. Therefore, the long-term own price elasticity is expected to be more elastic (greater in absolute value) than the short-term own price elasticity. As the short-term own price elasticity is −0.4 (negative and less than one in absolute value), the long-term own price elasticity is expected to be more elastic (greater in absolute value), meaning that it is less than −0.4. Therefore, the best choice is C, less than −0.4.

If the Short-Term Own Price Elasticity for Food Is Estimated