If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include:

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When there is a permanent increase in demand for the product of a perfectly competitive industry, the existing firms will experience a short-term increase in profits. This will signal new firms to enter the industry in order to also benefit from the higher profits. As more firms enter, the industry supply curve will shift to the right, causing the price to eventually fall back to the original level. The entry of new firms will continue until the profits of all firms in the industry have been reduced to their normal, long-run level. Therefore, both the entry of new firms and temporarily higher profits are part of the process of transition to a new long-run equilibrium.

If There Is a Permanent Increase in Demand for the Product