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The LeChatelier principle: the long and the short of it

Listed author(s):
  • Wing Suen


    (School of Economics and Finance, The University of Hong Kong, Pokfulam Road,Hong Kong, HONG KONG)

  • Paul Tseng


    (Department of Mathematics, University of Washington, Seattle, WA 98195, USA)

  • Eugene Silberberg


    (Department of Economics, University of Washington, Seattle, WA 98195, USA)

Using ordinary calculus techniques, we investigate the conditions under which LeChatelier effects are signable for finite changes in parameter values. We show, for example, that the short run demand for a factor is always less responsive to price changes than the long run demand, provided that the factor of production and the fixed factor do not switch from being substitutes to being complements (or vice versa) over the relevant range of the price change. The absence of a sign change in the complementarity/substitutability relation holds under conditions that are considerably more general than supermodularity of the production function.

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Article provided by Springer & Society for the Advancement of Economic Theory (SAET) in its journal Economic Theory.

Volume (Year): 16 (2000)
Issue (Month): 2 ()
Pages: 471-476

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Handle: RePEc:spr:joecth:v:16:y:2000:i:2:p:471-476
Note: Received: June 10, 1999; revised version: June 24, 1999
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