5.3 Comparative statics in the short run and the long run
If the demand curve shifts to the right (i.e. demand increases at every price) then:
- constant cost industry:
- Short run equilibrium price and output of each firm increase. Long run equilibrium aggregate output increases, but the price remains the same.
- increasing cost industry:
- Short run equilibrium price and output of each firm increase. Long run equilibrium aggregate output and the price increase. The change in the output of any firm is uncertain.
