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Marshall's original introduction of long-run and short-run economics reflected the 'long-period method' that was a common analysis used by classical political economists. However, early in the 1930s, dissatisfaction with a variety of the conclusions of Marshall's original theory led to methods of analysis and introduction of equilibrium notions.
This can include dynamic adjustment to the labor supply, adjustments in installed and overall capital stocks, and even adjustment to overall productivity and market structure. There are two broad approaches followed in the policy literature to such long-run adjustment. One involves what is called "comparative steady state" analysis.
To explain the causes of such fluctuations may appear rather difficult given these irregularities. However, if we consider other macroeconomic variables, we will observe patterns in these irregularities. For example, consider Figure 4, which depicts fluctuations in output and consumption spending, i.e., what people buy and use at any given period.
The long-run aggregate supply curve is affected by events that affect the potential output of the economy. These include the following shocks which would shift the long-run aggregate supply curve to the right: An increase in population; An increase in the physical capital stock; Technological progress
external shocks to the system (i.e. shocks to downstream or upstream prices) should trigger short- and long-run adjustment towards the long-run equilibrium, as: rational economic agents price their goods so as to maximize their constant utility function; in the long run prices of goods should reflect their scarcity.
The cobweb model or cobweb theory is an economic model that explains why prices may be subjected to periodic fluctuations in certain types of markets.It describes cyclical supply and demand in a market where the amount produced must be chosen before prices are observed.
In the short run (and possibly in the long run), markets may find a temporary equilibrium at a price and quantity that does not correspond with the long-term market-clearing balance. For example, in the theory of " efficiency wages ", a labor market can be in equilibrium above the market-clearing wage since each employer has the incentive to ...
Thoroughness: The purpose of rooting out bad economic performance and supplemented by a series of supporting comprehensive policy measures, although this may make a country pay adjustment costs in the short term, but in the long run, it will definitely help.