We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some explanations to these different supply curves and they sound contradictory. Like in short run there are wage contracts, labor laws etc so prices cannot adjust but still I am not clear what are the exact reason of such different supply curves.

  • $\begingroup$ What do you know about the difference between "short run" and "long run"? What is the difference in their definitions, and what does that mean? $\endgroup$ – 410 gone Dec 12 '15 at 13:16
  • $\begingroup$ Well, I infer these to be the results of the century long debate between classical economists who believed that prices will quickly adjust whnever an output gap exists (implying a vertical supply curve) and Keynesians who said that prices won't adjust in short run by themselves so some intervention is necessary (implying a horizontal supply curve). What is the rationale behind these curves. $\endgroup$ – Sub-Optimal Dec 12 '15 at 19:42
  • $\begingroup$ So you don't know the definitions of either, but you're asking about the consequences? Maybe it would better to start with the basics, rather than wading into the deep end. $\endgroup$ – 410 gone Dec 13 '15 at 5:36
  • $\begingroup$ Okay then, could you please explain the basic definitions only. Then I will try to understand other things. $\endgroup$ – Sub-Optimal Dec 13 '15 at 6:41
  • $\begingroup$ Please check whether it's already been asked: if not, then please do ask it as a question in its own right, rather than in comments. $\endgroup$ – 410 gone Dec 13 '15 at 7:01

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