Suppose that pasta is produced under conditions of perfect competition and that the constant-cost industry is initially in long-run equilibrium. Now suppose there is an increase in the price of wheat, which is a key ingredient in producing pasta. Further assume that the price elasticity of demand for pasta is -1.8. In the short run, we would expect to see a:

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With an increase in the price of wheat, the cost of production for pasta will increase. In the short run, firms in the pasta industry will not be able to adjust their production capacity, and hence, the supply of pasta will be less elastic. A -1.8 price elasticity of demand for pasta means that a 1% increase in the price of pasta will lead to a 1.8% decrease in the quantity demanded. Given this, we can expect the price of pasta to increase and the quantity of pasta to decrease in the short run, as the industry moves towards long-run equilibrium.

Suppose That Pasta Is Produced Under Conditions of Perfect Competition