= 27d567bc2d48d9f40e9ccc20ea370b15)
Furslid comments on How much does consumption affect production? - Less Wrong
You are viewing a comment permalink. View the original post to see all comments and the full post content.
= 783df68a0f980790206b9ea87794c5b6)
Loading…= b715d02e85f7b3b4ae65ca3d3e450868)
Subscribe to RSS Feed
Powered by Reddit
= f037147d6e6c911a85753b9abdedda8d)
You are viewing a comment permalink. View the original post to see all comments and the full post content.
Comments (60)
Long term supply curves are different than supply curves. They are similarly named, but different concepts.
Supply curves measure supply at a price.
Long term supply curves measure market equilibrium supply as demand changes over time.
The elasticity measurement is the derivative of supply with respect to price. It cannot be applied to long term supply curves.
I agree with your definitions of the two curves, although I don't know what point you're making by the distinction.
In either case we can ask, "how much will changes in demand affect equilibrium quantity?" In a constant-cost industry, the answer will be 1:1 in the long-run (as indicated by a flat, or infinitely elastic long-run supply curve), but as you gradually shorten the scope over which you're looking at the market, making it a shorter- and shorter-run supply curve, it will steepen (elasticity decrease) such that the answer is "less than 1:1".
First, is that because they are different things it's not a contradiction to what I said.
The second is that elasticity is not validly applied to long term supply curves, as they are not a function of supply in terms of price.