Short-run Fixed Price Analysis of Product Market
The prices in the short run take some time to react to factors of excess supply or demand as producers seek to modify their production plans in the meantime. For instance, if there is an excess supply, firms plan to produce less in the next cycle to prevent inventory accumulation. In addition, an individual firm is very small compared to the total market and cannot influence the market price. As a result, an individual enterprise must accept the market pricing. The level of prices remains constant and only varies when…