A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium.
a. Graphically illustrate and explain the short-run adjustments for the market and the firm to a decrease in consumer incomes. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.
b. Next, show on your graph and explain the long-run adjustment to the income change. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.