Abstract
The effect of a factor price change on the long-run cost curves of a perfectly competitive firm has been formerly examined. It has been assumed in the above analysis that output price adjusts instantaneously to the new minimum average cost of the firm after a change in a factor price. Based upon the above assumption, on which a disequilibrium situation of the market can be visualized, the effect of a factor price change on the number of the firms in the industry has also been discussed. However, the above discussion of the effect of a factor price change on the number of the firms in a disequilibrium situation has never been formalized. The objective of this article is to build a model, by which the effect of a factor price change on the excess demand of the market and number of the firms in a disequilibrium condition can be formerly or mathematically examined. In other words, I will construct the slopes of the firm's minimum average cost curve, which is derived from the change in a factor price, and investigate the way in which the change in a factor price affects excess demand of the market and the number of the firms in the industry in terms of the slopes of the minimum average cost of the firm.
Recommended Citation
Kim, Paul, "The Effect of a Factor Price Change on the Excess Demand of Market and the Number of Firms" (2012). Economics Papers and Presentations. 2.
https://scholarspace.jccc.edu/econpapers/2