1. THE TIME DIMENSION Short-run and long-run price adjustmentShort-run and long-run price adjustment –short- and long-run demand and supply curves –short- and long-run adjustment to a change in demand SpeculationSpeculation –stabilising speculation –destabilising speculation Uncertainty and riskUncertainty and risk –defining risk and uncertainty –reducing risks by holding stocks –futures markets

2. Response of supply to an increase in demand D1D1 P1P1 Q1Q1 P Q O a

3. D1D1 D2D2 P1P1 Q1Q1 P Q O a

4. D1D1 D2D2 S short-run P1P1 P2P2 Q1Q1 Q2Q2 P Q O a b Response of supply to an increase in demand

5. D1D1 D2D2 S long-run P1P1 P3P3 P2P2 Q1Q1 Q2Q2 Q3Q3 P Q O a b c S short-run Response of supply to an increase in demand

6. S1S1 P1P1 Q1Q1 P Q O a Response of demand to an increase in supply

7. S1S1 P1P1 Q1Q1 P Q O a S2S2

8. S1S1 S2S2 D short-run P1P1 P2P2 Q1Q1 Q2Q2 P Q O a b Response of demand to an increase in supply

9. S1S1 S2S2 D short-run D long-run P1P1 P3P3 P2P2 Q1Q1 Q2Q2 Q3Q3 P Q O a b c

10. Stabilising speculation: initial price fall P1P1 P Q O S1S1 D1D1 a

11. P1P1 P2P2 P Q O D2D2 a b S1S1 D1D1

12. P1P1 P3P3 P2P2 P Q O S2S2 D2D2 a b c D3D3 S1S1 D1D1

13. Stabilising speculation: initial price rise P1P1 P Q O S1S1 D1D1 a

14. P1P1 P2P2 P Q O S1S1 D1D1 D2D2 a b

15. P1P1 P3P3 P2P2 P Q O S1S1 S2S2 D1D1 D2D2 a b c D3D3

16. Destabilising speculation: initial price fall P1P1 P Q O S1S1 D1D1 a

17. P1P1 P2P2 P Q O S1S1 D1D1 D2D2 a b

18. P1P1 P3P3 P2P2 P Q O S1S1 S2S2 D1D1 D2D2 a b c D3D3

19. Destabilising speculation: initial price rise P1P1 P Q O S1S1 D1D1 a

20. P1P1 P2P2 P Q O S1S1 D1D1 D2D2 a b

21. P1P1 P3P3 P2P2 P Q O S1S1 S2S2 D1D1 D2D2 a b c D3D3