Share your thoughts on the following statement In a perfectl

Share your thoughts on the following statement: “In a perfectly competitive market, an increase in output requires a high price in the short run, but not in the long run.” Justify the position you take.

Solution

I agree to this statement, in perfectly competitive market, there are many firms and all of them produces the same product. According to the law of supply, the supply of any commodity is directly proportional to price of that commodity. ie. higher production and higher supply would only be triggered by increase in price of commodity. But, this applies only in short run because:-

1) in long run, price adjusts itself and so do the output supply.

2)in perfectly competitive market, profits of all firms turns zero in long run.

Hence, in a perfectly competitive market, an increase in output requires a high price in the short run, but not in the long run.