Long-run Equilibrium

Long-run equilibrium in economics refers to a state where supply and demand balance out in a market over time, resulting in stable prices and output levels. At this point, firms are making only normal profits (covering costs, including a fair return on investment), and there are no incentives for new firms to enter or existing firms to exit the industry. It reflects a point where market forces have fully adjusted, and resources are allocated efficiently, ensuring the market operates smoothly without inflation or shortages. This equilibrium is achieved after all short-term adjustments have taken place.