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Go to Changes in Supply, Demand and Market Equilibrium
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This section is Market Equilibrium in the Long Run
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Market Equilibrium in the Long Run

Recall In an Increasing Cost Industry, an increase in input demand by firms in the industry causes an increase in input prices and thereby an increase in average production costs. Also, at a LR equilibrium, profits of all firms in the industry are zero and so no firms are entering or exiting the market.
Claim   Assume that initially, the market or industry is in SR and LR equilibrium at (Q1*,P1*). Suppose demand increases from D1 to D2. If (PSR*,QSR*) denotes the SR market equilibrium price and quantity and (QLR*,PLR*) denotes the LR market equilibrium price and quantity, then PSR* > PLR* > P1* and QLR* > QSR* > Q1*.

Interactive Graph
Remark   For a decrease in demand, the adjustment process works in a similar fashion but changes occur in the other direction. E.g., a decrease in demand creates a surplus, which then decreases the equilibrium price and quantity in the short run. Negative SR profits induce firms to leaveand profits eventually return to zero. Work through this case on your own.