question archive An increase in the market price of men's haircuts from $20 to $30 per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35 to 40
An increase in the market price of men's haircuts from $20 to $30 per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35 to 40
Subject:EconomicsPrice:2.88 Bought3
An increase in the market price of men's haircuts from $20 to $30 per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35 to 40. When the market price remains at $30 for several weeks and all other things remain equal as well, the barbershop hires additional employees and provides 55 haircuts per day.
(i) What is the short-run price of elasticity of supply?
(ii) What is the long-run price of elasticity of supply?
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(1) The elasticity of supply is the percentage change in quantity to the percentage change in price. In the short run, the percentage change = (30 - 20) / 20 = 50%. The percentage change in quantity supplied = (40 - 35) / 35 = 14.28%. Thus the short-run elasticity of supply = 14.28% / 50% = 28.56%.
(2) In the long run, the percentage change in quantity supplied = (55 - 35) / 35 = 0.571. The long-run price elasticity of supply = 0.571 / 50% = 1.14
