An increase in the market price of men\'s haircuts, from $15 per haircut to $25

Question

An increase in the market price of men's haircuts, from $15 per haircut to $25 per haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from 35 to 45. When the $25 market price remains unchanged for several weeks and all other things remain equal as well, the barbershop hires additional employees and provides 65 haircuts per day. What is the short-run price elasticity of supply? What is the long-run price elasticity of supply?

Explanation / Answer

Short Run Price Elasticity=(45-35)/(25-15) 1 Long Run Price Elasticity=(65-35)/(25-15) 3

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