1) Please Explain with detail why the answer is B false Supplies are highly elas

Question

1) Please Explain with detail why the answer is B false

Supplies are highly elastic in the market period, but tend to become more inelastic in the long run.

A) True

B) False

2) Please Explain with details why the answer is C

If the following demand elasticities, 0.05 and 0.6, are given for a particular good or service, then:

A) both are definitely short-run demand elasticities.

B) both are definitely long-run demand elasticities.

C) 0.05 is probably the short-run demand elasticity and 0.6 is the long-run demand elasticity.

D) 0.6 is the short-run demand elasticity and 0.05 is the long-run demand elasticity.

3) Please Explain with detailed explanation why this is false

Demand for a product category may be inelastic, while the demand for specific brands of this product may be elastic.

A) True

B) False

4) Please Explain why the answer is D for question 4

If the price of a commodity increases by 5%, the total revenue spent on which of the following commodities would probably decrease?

A) gasoline

B) salt

C) prescription medicine for diabetes

D) air travel to Barcelona

Explanation / Answer

1) since it is generally assumed that in the long run all factors of production can be utilised to increase supply, whereas in the short run only labor can be increased, and even then, changes may be prohibitively costly. For example, a cotton farmer cannot immediately (i.e. in the short run) respond to an increase in the price of soybeans because of the time it would take to procure the necessary land. So u see in long run elasticity is more than in short run

2)The more time a producer has to respond to price changes the more elastic the supply. Supply is normally more elastic in the long run than in the short run for produced goods So 0.05 is for short run and 0.6 is for long run

3)Demand for a category will be elastic because there is a possibility of substitution by other products while the same is not for brands

4)you see all other commodities are quite inelastic as they are basic requirement but on the other hand air travel to barcelona is more elastic as there are substitutes you can take train or any other means available so its total revenue will decrease

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