by Mark Thoma, University of Oregon (Department of Economics)

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Commodity Price Movements in the Short-Run and Long-Run

Posted on August 24, 2008

This is mostly principles of microeconomics material, but I think it's a useful reminder about what to expect in commodity markets when there is a permanent increase in demand.Here is a typical model of the short-run and long-run response to an outward shift in the demand curve:The short-run supply curve (SRS) is steeper than the long-run supply curve (LRS), so at first the price rises from Pa to Pb, and this generally happens fairly quickly as shown on the second graph tracing price movements over time (i.e. the time to move from T1 to T2 is relatively short). In the longer run, supply is mor...

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commodities , commodity , copper , oil