THE TIME DIMENSION

1
THE TIME DIMENSION

• Short-run and long-run price adjustment
• short- and long-run demand and supply curves
• short- and long-run adjustment to a change in
  demand
• Speculation
• stabilising speculation
• destabilising speculation
• Uncertainty and risk
• defining risk and uncertainty
• reducing risks by holding stocks
• futures markets

2
Response of supply to an increase in demand
P
P1
a
D1
Q1
O
Q
3
Response of supply to an increase in demand
P
P1
a
D2
D1
Q1
O
Q
4
Response of supply to an increase in demand
P
S short-run
b
P2
P1
a
D2
D1
Q1
Q2
O
Q
5
Response of supply to an increase in demand
P
S short-run
S long-run
b
P2
c
P3
P1
a
D2
D1
Q1
Q2
Q3
O
Q
6
Response of demand to an increase in supply
P
S1
a
P1
Q1
O
Q
7
Response of demand to an increase in supply
P
S1
S2
a
P1
Q1
O
Q
8
Response of demand to an increase in supply
P
S1
S2
a
P1
b
P2
D short-run
Q1
Q2
O
Q
9
Response of demand to an increase in supply
P
S1
S2
a
P1
c
P3
b
P2
D long-run
D short-run
Q3
Q1
Q2
O
Q
10
Stabilising speculation initial price fall
P
S1
P1
a
D1
O
Q
11
Stabilising speculation initial price fall
P
S1
P1
a
D1
b
P2
D2
O
Q
12
Stabilising speculation initial price fall
P
S2
S1
P1
a
c
P3
D1
b
P2
D3
D2
O
Q
13
Stabilising speculation initial price rise
P
S1
a
P1
D1
O
Q
14
Stabilising speculation initial price rise
P
S1
b
P2
a
P1
D2
D1
O
Q
15
Stabilising speculation initial price rise
P
S1
S2
b
P2
c
P3
a
P1
D2
D3
D1
O
Q
16
Destabilising speculation initial price fall
P
S1
a
P1
D1
O
Q
17
Destabilising speculation initial price fall
P
S1
a
P1
P2
b
D1
D2
O
Q
18
Destabilising speculation initial price fall
P
S1
S2
a
P1
P2
b
c
P3
D1
D2
D3
O
Q
19
Destabilising speculation initial price rise
P
S1
a
P1
D1
O
Q
20
Destabilising speculation initial price rise
P
S1
b
P2
a
P1
D2
D1
O
Q
21
Destabilising speculation initial price rise
P
S2
S1
c
P3
b
P2
a
P1
D3
D2
D1
O
Q