Why do long-run elasticities of demand differ from short-run elasticities? Long-run elasticities of demand differ from short-run elasticities because A. it takes time for people to change their consumption habits. B. durable goods last a relatively long time. C. firms may be constrained in the short run by production capacity. D. both A and B are correct. E. all of the above.

The correct answer is option D.

Explanation:

Long-run elasticities of demand differ from short-run elasticity. In the short period is more inelastic. This is because people take time to adjust their consumption habits. So if the time period people have to adjust to the price change is long, then the demand will be elastic.

Durable goods can be used for a relatively long time. So they will have a less elastic demand.

A. it takes time for people to change their consumption habits.

Explanation:

Elasticity is a measure of the sensitivity of demand to price changes. We say that a demand is elastic when a slight variation in price is sufficient to impact the demand for a good or service. On the contrary, we say that demand is inelastic when price changes do not significantly change demand for the good. Normally goods are more elastic in the short run, as consumers tend to be refractory to price increases and slow the purchase of goods. Consumers tend to worry that it may be a passing price increase. However, in the long run consumers' perceptions of price increases adjust and demand normalizes, especially if the good is an essential good. For example, rising gasoline prices may decrease demand for gasoline in the short term. In the long run, consumers end up buying gasoline because it is a necessity item for those who own cars. Therefore elasticity tends to be less elastic in the long run.