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.
distinguish between industry demand and firm demand..
Jane, the manager of a company manufacturing air-conditioning units can choose between two production technologies for a new product line. If she chooses and installs technology 1,
Suppose that the price elasticity of demand for cereal is -0.75 and the cross-price elasticity of demand between cereal and the price of milk is -0.9. If the price of milk rises by
MONOPOLISTIC PRACTICES The following practices may be said to characterize monopolies. Exclusive dealing to supply and collective boycott Producers agree to supply onl
explain the role of managerial economist
A city has two newspapers. Demand for either paper depends on its own price and the price of its rival. Demand functions for paper A & B respectively, measured in tens of thousands
SHORT RUN OUTPUT AND PRICE In monopolistic competition, it's the product differentiation that permits its price without losing sales. Due to brand loyalty consumers will c
Q. Show the uses of income elasticity? A few significant uses of income elasticity are as follows: First, concept of income elasticity can be used to approximately compute t
Explain the role scarcity of resources plays in economics decision making
a. Explain why the demand for a particular brand is more elastic than the demand for all cigarettes. If Lucky Strike raised its price by 1% in 1918, was the price elast
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