Short-Run versus Long-Run Elasticities

1 year ago
Microeconomics

Short-run – one year or less

Long-run – enough time is allowed for consumers or producers to adjust fully to the price change

**For goods which are used daily (coffee, toilet paper, paper, pens), demand is more price elastic in the long run than in the short run.

**For goods which are bought rarely (cars, fridges, houses), demand is less elastic in the long run than in the short run.

Cyclical industries – Industries in which sales tend to magnify cyclical changes in gross domestic product and national income.

**Firms face capacity constraints in the short run and need time to expand capacity by building new production facilities and hiring workers to staff them.

Bijay Satyal
Nov 24, 2021
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