Question

Does neoclassical economics focus on the long term or the short term? Explain your answer.

Short answer

Neoclassical economics focus on the long term.

Step-by-step solution

 Concept of neoclassical economics.

Supply and demand are the driving forces underlying the creation, pricing, and consumption of products and services, according to neoclassical economics.

Concept of neoclassical economics.

Neoclassical economists are those who believe in Say's law in the modern age. They believe that supply generates demand on its own. They believe that in the long run, there is no such thing as overproduction of any good. In a market economy, demand consumes all available supply.

According to Say, the law of markets dictates that a general glut (supply exceeding demand) cannot emerge. According to this law, there is always enough supply to meet demand. In the economy, there is no excess supply or demand. When there is an excess supply of one commodity or service, there must be a demand deficit for another good or service.

Production may be excessive or deficient in the short term, but supply and demand are always equal in the long run. Because producers of products have the purchasing capacity to demand or consume other goods, this is the case. Because there are adequate ties with the producers in the long run to absorb demand for goods and services. As a result, neoclassical economists think that all variables can be modified throughout time.