- Marshall was the first economist to analyze how time impacts price determination. He divided pricing into four time periods: market period, short period, long period, and secular period. - The market period is very short, usually days or weeks. For perishable goods like milk, the time period is just one day. Price is determined by demand as supply is fixed. - In the short period (a few months), supply can be adjusted through measures like adding shifts or hiring more workers. Both supply and demand influence price. - The long period allows full supply adjustment to demand changes. The long-run or normal price is where average and marginal costs are minimized. - The secular period is very long, over

1. Time Element in Price Theory
ACADEMIC DISCUSSIONS

2. Demand Supply

3. Time Element in Price Theory
• Marshall was the first economist who analyzed
the importance of time element in price
determination
• ఒక వస్త
ు వు ఉత్పత్తుకి డిమ ాండ్ పెరిగినప్ుపడు లేదా త్గిినప్ుపడు, ఆ వస్త
ు వు
స్పెలై ఒకే స్మయాంలో పెరగదత లేదా త్గిదత. స్పెలై లో మ రపపలు స ాంకేత్తక
క రక లపెై ఆధారప్డి ఉాంటాయి, ఇవి మ రడానికి స్మయాం ప్డుత్ ాంది.
అాందతవలై, డిమ ాండ్ మరియు స్పెలైల మధ్య స్రప
ు బాటు ఒకేస రి జరగదత.

4. Time Element in Price Theory
•The time period involved in adjustment the scale of
production, size and organization of the industry in
accordance with the changed demand for its
product

5. Time Element in Price Theory
•Marshall has divided the pricing of products
into four time periods –
Market period
Short period
Long period
Secular period

6. Market Period
•Market period is very short period supply
being fixed, price is determined
•The time period is few days or weeks the
supply of a commodity can be increased to
match the demand. This is possible for
durable goods.
•The time period for perishable
commodities is only a day

7. Perishable goods
•The price of a perishable commodity
such as milk, vegetable, fish is
primarily influenced by its demand.
•Supply has no influence on price
because it is fixed. Therefore, the price
of a perishable commodity rises with
the increase in its demand and falls
with the decrease in its demand.

8. Perishable goods
The Price of a Perishable
commodity like milk,
vegetable, fish etc.is primary
influenced by its demand

9. Durable goods
•Most commodities are durable which can be kept
in stock.
•When the price increase with the increase in its
demand, its supply can be increased out of the
given stock. Such commodities are cloth, wheat,
tea, etc.

10. Durable goods
•First a minimum price below which a seller
will not sell his commodity this is also
known as the Reserve price
•Second a maximum price at which the
seller will be prepared to sell the entire
quantity of his commodity

11. Durable goods
• While fixing the reserve price for his commodity any seller
would take into consideration the following factors.
• 1 Durability of the commodity
• 2 Price in future
• 3. future cost of Production
• 4. Expenses on Storage
• 5. Liquidity preference
• 6. Demand in future

12. Durable goods
• SMS1 is the supply curve during the market period.
OQ1 is the total supply of the commodity.
• OS is the minimum or reserve price i.e., the seller does
not sell his commodity.
• When the demand curve D intersects the supply curve
SMS1 at E, OP price is determined at which he sell OQ
quantity of his commodity and keeps OQ1 in stock.
• If the demand is D2 the price is OP2 at which he sells
OQ2 quantity and keeps Q2Q1 in stock.
• It is only when the demand increases to D1 that the
seller would be prepared to sell the entire stock of
his commodity at the maximum price of OP1.
• If the demand rises beyond D1, it will only raise the
price above OP1 because in the market period not more
than OQ1 quantity can be sold.

13. Short Period Price
•It relates to a few months i.e., supply can be
changed in accordance with demand.
•If the form wants to increase the supply of the
product, this can be done by starting two or three
shifts and by employing more labour, raw
materials etc.

14. Short Period Price
• The short run price is also known as the short run normal price.
D is the original demand curve and MS is the
market period supply curve. Both intersect at P.
and establish PQ price .OQ quantity.
Suppose the demand rises D1 curve market price
increase PQ to PIQ1 (supply possible to increase
with the help of existing plants and machines
extra labour and raw materials) the supply will be
increased along the SRS curve
The short-run price is less than the original
market price
Supply is more important than demand in the
short run period

15. Long Period Price or Normal Price
•Supply can be fully adjusted to Demand.
•Long run price is also known as the Normal
price

16. Long Period Price or Normal Price
• The long run equilibrium point is E where
LMC=MR=AR=LAC at its minimum point.
This is the normal price
• If the price increases from OP to OP1 the form
would sell QQ1 AB extra profit. Attract new
firms into the industry the supply would
increase further
• The price fall from OP to OP2 the forms reduce
the supply by Q2Q and here by incur CD losses,
some of the firms would leave the industry.

17. Secular Period Price
•The secular period is very long. According
to Marshall, it is a period of more then ten
years in which changes in demand fully
adjust themselves to supply
•Marshall did not analyse pricing under the
secular period

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