Question

An increase in the market price of​ men's haircuts, from ​$ per haircut to ​$ per​ haircut, initially causes a local barbershop to have its employees work overtime to increase the number of daily haircuts provided from to . When the ​$ market price remains unchanged for several weeks and all other things remain equal as​ well, the barbershop hires additional employees and provides haircuts per day.

Required:
What is the short-run price elasticity of supply?

Answer 1

Meaning & formula of short run price elasticity of supply, its numerical example as per given case

Step-by-step explanation:

Short Run Price Elasticity of Supply denotes the proportionate change in quantity supplied due change in price. Price & quantity supplied change in same directions, as per law of supply.

In given case, increase in price of haircut increases the quantity supplied of the service of haircut, by more per labour service rate or more labour.

Short Run price elasticity of supply = percentage change in quantity supply/ percentage change in price =

Eg : If price increases from 5 to 10, & 5 workers' haircut increase from 4 to 6 haircuts for each worker, then total haircuts increase from 4 x 5 = 20 to 6 x 5 = 30

Short Run Price Elasticity of supply = 100/50 = 2