Discuss three time horizons in terms of price elasticity

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Reference no: EM13159770

Suppose a virus infects the California lettuce crop, cutting production by half. Consider three time horizons:

(a) The very short run means a period that is too short to allow farmers to change the amount of lettuce that has been planted. No matter what happens to the price, the quantity supplied will be the amount already planted, less the amount destroyed by the virus.

(b) The intermediate run means a period that is long enough to allow farmers to plant more fields in lettuce, but not long enough to permit them to develop new varieties of lettuce, introduce new methods of cultivation, or acquire new specialized equipment.

(c) The long run means a period that is long enough to allow farmers to develop new varieties of virus-resistant lettuce and improve cultivation techniques. Discuss these three time horizons in terms of the price elasticity of supply. Sketch a figure showing supply curves for each of the time horizons.

Reference no: EM13159770

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