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The LeChatelier Principle
Paul Milgrom and John Roberts
The American Economic Review
Vol. 86, No. 1 (Mar., 1996), pp. 173-179
Published by: American Economic Association
Stable URL: http://www.jstor.org/stable/2118261
Page Count: 7
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The LeChatelier principle, in the form introduced into economics by Paul A. Samuelson, asserts that at a point of long-run equilibrium, the derivative of long-run compensated demand with respect to own price is larger in magnitude than the derivative of short-run compensated demand. We introduce an extended LeChatelier principle that applies also to large price changes and to uncompensated demand as well as to a wide range of concave and nonconcave maximization problems outside the scope of demand theory. This extension also clarifies the intuitive basis of the principle.
The American Economic Review © 1996 American Economic Association