Market period is the period through which the capability of the firms to affect any modifications in supply in response to any modification in demand is tremendously limited or almost nil. Therefore supply is more or less fixed in the market period without any modifications. Though, the demand might vary during this period.
Figure: Market Period
The equilibrium price will be found out according to the modifications in demand, provided the fixed supply. The figure shown above describes the equilibrium price in market period.
Since the supply is fixed in market period, it is illustrated as a vertical line SMP. It is also termed as inelastic supply curve. Whenever demand rises from DD to D1D1, price rises from P to P1. Likewise, a fall in demand from DD to D2 D2 pulls the price drop from P to P2. The market for perishables can be a good example. The demand for plantain fruits rises during the festival season; therefore the prices will naturally go up as the supply can’t be raised instantly to meet the demand. Therefore, demand determines the equilibrium price in the market period.
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