What Is The Role Of Time In The Determination Of Price?

Time period in the analysis of economics has been divided in three parts.
• Very short period or market period
• Short period
• Long period
Very short period or market period: this is a period of a few hours or at the most one or two days. Alfred Marshall calls it a market period. The supply of output in this period is fixed or in the other words elasticity of supply of a product in this period is zero. Thus the demand curve in the market period dominates in the determination of price. Market price is generally determined temporarily.

Short Period: this is a period of few months or at the most one or two years. In this period, some of the factors of production are fixed while others remain variable. Thus the supply of output can be increased to a limited extent. Both demand and supply play their normal role in the determination of price. The price determined in this period is called normal price.
Long Period: this is a period of quite a few years in which all factors of production are variable factors. Thus supply of output can be increased to a desired extent keeping in view the demand of the product. Price determined in this period is also called normal price.

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