Le Chatelier's Principle - Applications in Economics

Applications in Economics

In economics, a similar concept also named after Le Chatelier was introduced by U.S. economist Paul Samuelson in 1947. There the generalized Le Chatelier principle is for a maximum condition of economic equilibrium: Where all unknowns of a function are independently variable, auxiliary constraints—"just-binding" in leaving initial equilibrium unchanged—reduce the response to a parameter change. Thus, factor-demand and commodity-supply elasticities are hypothesized to be lower in the short run than in the long run because of the fixed-cost constraint in the short run.