Principles of Microeconomics / Unit 7 MIC 0628 short lesson, about 20 seconds
A Cost Change in the Short and Long Run
Captions available
The idea
A lower input price shifts every firm's marginal cost down and market supply with it. Short run, price falls by less than the saving, so firms profit; entry then passes on the rest.
In practice
A three-dollar cost cut lowers price by two at first and three in the end.
Where people slip
Consumers get the whole saving in the long run; competition passes innovation through.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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