|
Economic equilibrium is a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change.
|
|
Surplus. Higher supply than demand.
|
|
|
Equilibrium price falls
|
|
|
Equilibrium qty rises
|
|
|
Happens if new tech released or new firm enters market
|
|
Shortage. Higher demand than supply.
|
|
|
Equilibrium Price rises
|
|
|
Equilibrium qty falls
|
|
|
Demand curve shifts to the right
|
|
|
Maybe because incomes have increased or population has grown.
|
|
Competitive equilibrium
|
In a competitive equilibrium, supply equals demand.
|
|
Ceteris Paribius 'all else being equal'
|
Requires that when analysing the relationship between two variables all else must be held constant.
|
|
Market equilibrium
|
A condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services offered by sellers.
|
|
Competitive market equilibrium
|
A market equilibrium with many buyers and many sellers
|
|
Surplus
|
Qty supplied > qty demanded. Price is above equilibrium.
|
|
Shortage
|
Qty supplied < qty demanded. Price is below equilibrium
|
|
Three basic properties of equilibrium in general proposed by Huw Dixon:
|
|
|
P1
|
The behavior of agents is consistent.
|
|
P2
|
No agent has an incentive to change its behavior
|
|
P3
|
Equilibrium is the outcome of some dynamic process (stability).
|
|
Complementary goods: price change of one effects quantity demanded of the other.
|
|
|
Price increasing on complimentary
|
See surplus
|
|
Price decreasing on complimentary
|
See shortage
|
No comments yet.
Cheatography n. The art of mapping complex subjects into clear, instantly navigable reference guides.
