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Unformatted text preview: Ashley B. Hilliard 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#3, Assignment 3 1. Is the price elasticity of supply usually larger in the short run or in the long run? Why? Its usually larger in the long run, because in the short-run it's hard for producers adjust their production lines, build new factories, purchase equipments, hire qualified workers. While in the long-run they can do it more easily and effectively making supply more adaptive in long-term. 2. Maria has decided always to spend one-third of her income on clothing. A. What is her income elasticity of clothing demand? Her income elasticity of clothing demand will be 1. Because since she is spending a constant fraction of her income, her percentage change in clothing demand must equal to her percentage change in income. Suppose her income is $6000 and price of clothing is $2, then she buys 1000 clothes. If her income rises by 5% it becomes 6300 and she is $2, then she buys 1000 clothes....
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