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Quantity AdjustmentEdit

Def: The movement of a firm to a new demand curve by changing quantity produced rather than the price of the product produced. The assumption is that price is somewhat given (because of Nominal Price Rigidity), or at least less easy to predict the responce of price changes in the market. A given firm then can change the output to move more in line with its self-interest without risking as much. Quantity adjustment would be more likely to be employed when price would otherwise fall. "Prices seem to bear a relatively larger proportion of the adjustment burden when the shock is 'large', and vice versa for quantities when the shock is 'small'"[1].

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