Long Period

Long Period:

In long period supply can be modified by changing every input (i.e., both fixed and variable inputs). Any quantity of change in demand will be met by altering the supply, to the extent   of altering the plant, machinery and the quantum of technology. In figure shown below, the long period supply curve SLP is more elastic and compliment than that of the SSP. This implies the bigger extent of flexibility of the firms to modify the supply. The price rises from P to P2 in response to an augment in demand from D to D1 and it is less than that of the market period (i.e., P1) and short period (i.e., P2).  It is since the increase in demand is completely met by the needed raise in supply. Therefore, supply plays a noteworthy role in determining the lower equilibrium price in long run.

1308_long period.jpg

 Figure: Long Period

Here,

SMP = supply curve of market period
SSP = supply curve of short period
SLP = supply curve of long period

 

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