Is Long-Run Equilibrium the Same as Short-Run Equilibrium in Economics?

[octahedron]

If an economy is in long-run equilibrium (say that we assume it is so), can we directly infer that it is ALSO in short-run equilibrium?

 

[EnumaElish]

Yes. By definition, the economy is in LR-eq. if AD = SRAS = LRAS. The first equality implies SR-eq.

 

[Architeuthis Dux]

I must clarify that the concept of equilibrium in economics is a theoretical construct and not an observable state in the real world. Therefore, it is important to understand that there is no definitive answer to the question of whether long-run equilibrium is the same as short-run equilibrium in economics.

In economics, short-run equilibrium refers to a situation in which the demand for goods and services is equal to the supply of goods and services at a given point in time. This equilibrium is temporary and can change due to various factors such as changes in consumer preferences, technology, and government policies. On the other hand, long-run equilibrium refers to a state in which all markets in an economy are in equilibrium, and there is no tendency for the economy to experience any significant changes in the long run.

While long-run equilibrium is often considered as a more stable state compared to short-run equilibrium, it does not necessarily mean that they are the same. In fact, the two concepts are interrelated but distinct. The long-run equilibrium is achieved when all markets in an economy are in equilibrium, which includes the labor market, capital market, and goods market. This means that the economy is operating at its full potential, and there is no excess demand or supply in any market.

In contrast, short-run equilibrium only considers the goods market and does not take into account the potential adjustments in other markets. Therefore, it is possible for an economy to be in long-run equilibrium but not in short-run equilibrium. For example, an economy may have a high level of unemployment in the short run due to a recession, but in the long run, it may reach full employment as the labor market adjusts and the economy returns to its long-run equilibrium.

In conclusion, long-run equilibrium and short-run equilibrium are related but not necessarily the same in economics. An economy may be in long-run equilibrium but not in short-run equilibrium, and vice versa. It is crucial to consider both concepts in understanding the overall performance of an economy and making informed policy decisions.