Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The industry is

Question

Quizplus · Accepted Answer

The upward shift in demand leads to an increase in both the equilibrium price and quantity in the short run. This results in economic profits and attracts new firms to enter the industry in the long run. However, the industry is an increasing-cost industry, meaning that as output increases, the cost of inputs (e.g. labor and raw materials) increases. This leads to a higher long-run equilibrium price and a smaller increase in the quantity produced compared to the short run.

Figure 6.5 -Figure 6.5 Shows the Short-Run and Long-Run Effects of an of an Increase