Intertemporal Equilibrium

DEFINITION of 'Intertemporal Equilibrium'

An economic concept that holds that the equilibrium of the economy cannot be adequately analyzed from a single point in time, but instead should be analyzed across different periods of time. According to this concept, households and firms are assumed to make decisions that affect their finances and business prospects by assessing their impact over lengthy periods of time rather than at just one point.

BREAKING DOWN 'Intertemporal Equilibrium'

An example of an individual making an intertemporal decision would be one who invests in a retirement-savings program, since he or she is deferring consumption from the present to the future. Intertemporal decisions made by companies include decisions on investment, staffing and long-term competitive strategy.