Overview
Long-run equilibrium adjustments are essential for understanding how economies respond to changes and shocks. When an economy experiences a disruption, such as a sudden increase in demand or a supply chain issue, it does not remain in disarray. Instead, various mechanisms come into play to restore b...
Key Terms
Example: In a perfectly competitive market, the price of goods adjusts until market equilibrium is reached.
Example: A sudden increase in oil prices can be an economic shock.
Example: Price changes are a common adjustment mechanism.
Example: In the short run, a factory cannot change its size.
Example: In the long run, a company can build new factories.
Example: The supply curve slopes upward, indicating higher prices lead to more supply.
Related Topics
Supply and Demand
The fundamental concepts that describe how prices are determined in a market.
beginnerMarket Structures
Different types of market environments that affect competition and pricing.
intermediateEconomic Policy
The strategies and actions taken by governments to influence economic conditions.
intermediateBusiness Cycles
The fluctuations in economic activity that an economy experiences over time.
intermediateKey Concepts
Market EquilibriumSupply and DemandEconomic ShocksAdjustment Mechanisms