Question

The price elasticity of demand generally tends to be ___________.

• A. Smaller in the long run than in the short run
• B. Smaller in the short run than in the long run
• C. Larger in the short run than in the long run
• D. Unrelated to the length of time

Answer 1

The correct option is B Smaller in the short run than in the long run

Elasticities are often lower in the short run than in the long run. Changes that just aren't possible to make in a short amount of time are realistic over a longer time frame. On the demand side, that can mean consumers eventually make lifestyle choices like buying a more fuel-efficient car to reduce their gas usage. Demand tends to be more elastic in the long rung rather than in the short run, because when prices change consumers often need more time to respond and change their shopping habits. So in the short run, demand for fuel may be very inelastic. However, in the long run, the demand for oil may be more price elastic.