Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Stable and Unstable Equilibrium
An equilibrium is said to be stable equilibrium when economic forces tend to push the market towards it. In other words, any divergence from the equilibrium position sets up forces, which tend to restore the equilibrium. This is the case in the market for good X illustrated.
At prices above Ope, there is an excess supply which pushes the price down. At prices below Ope there is an excess demand which pushes the price up.
Unstable equilibrium on the other hand is one such that any divergence from the equilibrium sets up forces which push the price further away from the equilibrium price. Consider the figure below which illustrates the market for good Y, which has a demand curve sloping upwards from left to right. Good Y might be an inferior good or a veblen good.
Price Ope is the equilibrium price and quantity Oqe is the equilibrium quantity. The "abnormal" demand curve means that at prices above Ope there is excess demand which pushes the price upwards and away from the equilibrium. Similarly, at prices below Ope, there is excess supply which pushes the prices even further down.
Thus, although equilibrium are states of rest at which no economic forces exist to change the situation, it is important to remember that not all equilibria are stable. The equilibrium in the figure above is sometimes called a knife edge equilibrium because a small change in price sends the system well away from equilibrium.
Q. Proportion of Market Supplied - Determinants of Demand? Price elasticity of market demand moreover relies on the proportion of market supplied at the determined price. If le
T HE BANKING SYSTEM Consists of all those institutions which determine the supply of money. The main element of the Banking System is the Commercial Bank (in Kenya). The sec
Goverment Banker, Fiscal Agent and Adviser Central banks in all countries acts as the fiscal agent, banker and adviser on all important financial matters to government of thei
Q. Implications for the shape of cost function? A cost function is also a mathematical relationship, one which relates the expenses an organisation incurs on the quantity of ou
Q. What do you mean by Ordinal utility? A method of analysing utility or satisfaction derived from consumption of services andgoods, based on a relative ranking of services and
Monetary Theory We have seen that Schumpeter theory which runs in terms of innovations and technical change, is at best an incomplete explanation of trade cycle . there are eco
Price Elasticity of Demand and the slope of the Demand Curve Elasticity determines the shape of the demand curve. From the formulas
MONOPOLISTIC PRACTICES The following practices may be said to characterize monopolies. Exclusive dealing to supply and collective boycott Producers agree to supply onl
Open Market Operations The Central Bank holds government securities. It can sell some of these, or buy more, on the open market, buying or selling through a stock exchange or
Q. What is Internal Diseconomies of Scale? Internal economies of scale exist only up to a certain size of the plant. Size of plant is called the optimum plant size since with t
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd