Shift or Pivot? Market Entry and Exit With Linear Supply and Demand Curves.

The article focuses on correcting a common misconception in microeconomics textbooks regarding how market entry and exit by consumers and producers affect market supply and demand curves. Contrary to the traditional portrayal of these effects as parallel shifts of linear market curves, the article demonstrates that because market-level curves are horizontal summations of individual curves, entry and exit cause the market curves to pivot—flattening with entry and steepening with exit—rather than shift in parallel. This reconceptualization has significant implications for understanding own-price elasticities, consumer and producer surplus, tax incidence, and the competitive market's adjustment to long-run equilibrium. The article argues for teaching market entry and exit as pivoting effects to provide a more consistent and accurate economic model, especially in principles and intermediate courses.