Syllabus T. Y. B. A. Paper : IV advanced economic theory with effect from academic year 2010-11 in idol

3.2 SIGNIFICANCE OF TIME ELEMENT IN PRICE 
DETERMINATION 
– Dr. ALFRED MARSHALL 
Dr. Alfred Marshall introduced the element of time in price 
determination in a perfectly competitive market. 
Marshall has described four time periods. 
1) Market period (very short period) 
2) Short period 
3) Long period 
4) Very long Period (secular period)
1) The Market Period: 
The market period is that in which supply of a commodity 
remains fixed. It means supply of a commodity is limited by the 
existing stock. As a result supply becomes perfectly inelastic. 
Hence demand for a commodity influences price of that 
commodity. Supply remaining constant changes in demand lead to 
change in the price of that commodity. This price is called market 

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price. The market price is an equilibrium price, an equilibrium 
between demand and supply at a moment of time. This price is 
temporary and always subject to fluctuations. The following figure 
will explain how market price of a any commodity gets fixed. 
 
Figure 3.1 
Along OX axis supply and demand for commodity is 
measured and along OY axis price is measured. OS is a supply 
curve in the market. As it is market period supply is perfectly 
inelastic, i.e. supply will remain constant, when demand goes up 
from DD to DDI there is a shift in demand curve to the right side 
and the price rises from OP to OP
1
. So new equilibrium is 
established at OP
1
. If however, demand falls, the demand curve 
shifts to the left from DD to DD
2
. The price will now decrease from 
OP to OP
1
. 
It clearly shows that in a market period when demand goes 
up it pulls up the price, and if demand declines it pushes price 
down.