3.7 The Market Mechanism: Iterating Toward Equilibrium - or Not

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Anonymous
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302235
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3.7 The Market Mechanism: Iterating Toward Equilibrium - or Not
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2015-05-06 09:42:40
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Economics for Investment Decision Makers,Ch1_Demand and Supply Analysis: Introduction
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  1. Excess Supply
    Quantity supplied is greater than the quantity demanded.
  2. Market Mechanism
    In the case of excess supply, price will fall; in the case of excess demand, price will rise; and in the case of neither excess supply nor excess demand, price will not change.
  3. Stable
    With respect to demand and supply, whenever price is disturbed away from equilibrium, it tends to converge back to that equilibrium.
  4. Unstable
    With respect to demand and supply, at a price above equilibrium there will be excess demand, and the market mechanism will dictate that price should rise, thus leading away from equilibrium.

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