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

Question

An increase in the market price of men's haircuts, from $15per haircut to $25 per haircut, initially causes a local barbershop to have its employees work over time 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 equals well, the barbershop hires additional employees and provides 65 haircuts per day. What is the short-run price elasticity supply? What is the long-run price elasticity of supply (seepages427-428,)

Explanation / Answer

Ans.1 Short Run Price Elasticity=(45-35)/(25-15) = 1

Ans. 2 Long Run Price Elasticity=(65-35)/(25-15) = 3

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