Short-Run and Long-Run Supply Elasticity in Response to Demand Increase
In the short run, when production capacity is fixed, the supply curve is typically steep or inelastic. As a result, an increase in demand leads to a sharp rise in price but only a small increase in the quantity supplied. However, in the long run, the higher price incentivizes firms to invest in new capacity. This investment increases the market supply, making the supply curve more elastic. Consequently, the long-term outcome is a more significant increase in quantity and a moderation of the initial price surge.
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Introduction to Microeconomics Course
CORE Econ
Ch.8 Supply and demand: Markets with many buyers and sellers - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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