Suppose the Price Elasticity of Supply for Cheese Is 0

question 16

Multiple Choice

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.

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Definitions:

Short Run

A period in economic theory during which at least one input (like capital) is fixed, contrasting with the long run where all factors of production are variable.

Prices

The amount of money expected, required, or given in payment for something.

Unemployment

Unemployment refers to the situation when individuals who are able and willing to work cannot find employment.

Price Level

The median price level of all goods and services currently offered in the economy.