Real-World Examples of Short-Run vs. Long-Run Industry Supply & Elasticity.

📚 Quick Study Guide

• ⏱️ Short-Run: A period where at least one input is fixed. Supply is more inelastic.
• ⏳ Long-Run: A period where all inputs are variable. Supply is more elastic.
• 📈 Elasticity of Supply (EoS): Measures the responsiveness of quantity supplied to a change in price. $EoS = \frac{\% \text{ Change in Quantity Supplied}}{\% \text{ Change in Price}}$
• 🏭 Constant Cost Industry (Long Run): Increased demand leads to increased production without affecting input costs. Supply curve is perfectly elastic.
• ⬆️ Increasing Cost Industry (Long Run): Increased demand leads to increased production, but input costs rise. Supply curve is upward sloping.
• ⬇️ Decreasing Cost Industry (Long Run): Increased demand leads to increased production and lower input costs. Supply curve is downward sloping.

🧪 Practice Quiz

1. Which of the following is the BEST example of a short-run supply decision for a wheat farmer?
   1. A. Deciding to purchase an additional 100 acres of land.
   2. B. Deciding how much fertilizer to use on the existing wheat crop.
   3. C. Deciding to switch from growing wheat to growing corn next year.
   4. D. Deciding to sell the farm and retire.
2. In the long run, all inputs are:
   1. A. Fixed.
   2. B. Variable.
   3. C. Decreasing.
   4. D. Constant.
3. Which industry is MOST likely to exhibit a perfectly elastic long-run supply curve?
   1. A. Oil extraction.
   2. B. Software development.
   3. C. Diamond mining.
   4. D. Agricultural produce like tomatoes.
4. An increasing cost industry experiences what change in input costs as industry output expands in the long run?
   1. A. Input costs remain constant.
   2. B. Input costs decrease.
   3. C. Input costs increase.
   4. D. Input costs fluctuate randomly.
5. If the price of coffee increases by 10% and the quantity supplied increases by 5% in the short run, what is the elasticity of supply?
   1. A. 0.5
   2. B. 2
   3. C. 50
   4. D. 10
6. A decrease in the cost of producing smartphones due to technological advancements would cause the industry's long-run supply curve to:
   1. A. Shift to the left.
   2. B. Shift to the right.
   3. C. Become more inelastic.
   4. D. Remain unchanged.
7. Which factor is LEAST likely to affect the elasticity of supply?
   1. A. Availability of inputs.
   2. B. Time horizon.
   3. C. Storage capacity.
   4. D. Consumer preferences.