#### 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.

http://scholarspace.jccc.edu/econpapers/2