The LeChatelier Principle: the Long and the Short of It

Using ordinary calculus techniques, we investigate the conditions under which LeChatelier eeects are signable for nite changes in parameter values. We show, for example , that the short run demand for a factor is always less responsive to price changes than the long run demand, provided that the factor of production and the xed factor do not switch from being substitutes to being complements (or vice versa) over the relevant range of the price change. The absence of a sign change in the complemen-tarity/substitutability relation holds under conditions that are considerably more general than supermodularity of the production function.