Question

A football stadium had a seating capacity of 45,382. Even though the demand for the seats was high, the supply was limited even at high prices. The board decided to expand the seating capacity and it was increased to 54,074 in two years. What principle does this illustrate?

• A. the supply curve is perfectly inelastic
• B. the supply curve is more elastic in the long run than in the short run
• C. the supply curve is more elastic in the short run than in the long run
• D. the supply curve is perfectly elastic

Answer 1

The correct option is B

the supply curve is more elastic in the long run than in the short run

The above example illustrates that the supply is more elastic in the short run than in the long run. Despite the high demand and people willing to pay higher prices, the seating capacity can't be increased in the short run.