we can analyze the concept by taking perfect competition situation
in the market.
- in perfect
competition the industry
sets the price and all the firms have to accept the
price.none of the firm can change the price or influence the
price.
- in short
run,if the demand for the
product increases then the firm will increase the price but the
cost to produce the product would remain same.it means the firm
would be able to produce the good at existing cost but sell the
product at increased price.this difference (shaded area in diagram)
would be considered as abnormal profit or super normal
profit.
- remember there
is no barrier of entry and exit therefore this situation would
encourage the new firms to do business and they would keep coming
till each firm is again earning the normal
profit
therefore above
example is only suitable in case of short run.