Practice Quiz

Praxis II World and US History

Category - Economics

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Why is there a discrepancy between long-term and short-term effects of a change in demand?
  1. The market is slow to understand most changes.
  2. The market waits to see if the change is permanent.
  3. Equilibrium situations always take time to settle down.
  4. There is a cost associated with adapting to the market.
Explanation
Answer: D - Short-term and long-term effects are different because there is a cost associated with adjusting to the market. For example, if a farmer must choose between growing corn or wheat, he or she will check prices before buying seeds. But a farmer who has already bought seeds would face a large loss by throwing them out and buying seeds for a different crop.
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