ABSTRACT
It might seem, therefore, that the price ruling in a market at any moment is a sort of average of the prices expected by all the dealers in it, and that these expectations relate to what economists call the 'long-period equilibrium price'-that is to say, the average price which would have to rule over a considerable period (perhaps a number of years) in order that the amount of the commodity produced in that period and the amount taken up for final consumption or use should be about equal. It might also be felt that, since the dealers in question are the people with the strongest incentive and the best opportunity to estimate the long period equilibrium price, such an average of their views will not be very far wrong. If this were true, then free market prices would be reasonably steady; whenever a rise in supply or a fall in ultimate demand for a commodity was (correctly) foreseen. the price would fall smoothly so as to reach the new equilibrium level just as the anticipated rise or fall became effective, and anticipated reductions in supply or increases in final demand would rais<! price in the same orderly way.
