Think about when there's a good amount of traffic on the highway, not bumper to bumper, but enough to be stop and go at times. There's always one line moving faster than the other two (on a three lane highway). Whenever one is in this situation, they usually feel compelled to move into the that line. But then what happens? A lot of people move into that lane and then it becomes the slowest lane.
Think about pure competition. When the firms present are experiencing a short term economic profit, more firms join the industry, lowering the equilibrium demand price for the industry, just like driver move into the fastest lane. Shortly thereafter, the industry's firms experience short term economic losses, just like the lane the drivers move into slows down to an even slower rate. In the long run, of course, the firms and the drivers alike receive a normal profit (travel at an average, standard speed that every car regardless of lane switching will experience).
Thoughts? I liked it. Goes to show how much of an economics nerd I truly am. :)
Posts
No comments:
Post a Comment