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There are many reasons why a consumer market equilibrium may be unstable, and it depends on which school of economic thought you follow. Generally, if there actually is a consumer equilibrium (which some believe does not truly occur) then what will cause it to become unstable is the effect of random shocks:
I.e.) let future consumption for any period be ct+j = ct + Et.
E is a random shock variable which is normally distributed around the mean (which we'll assume to be 0). Consumption in any period is simply equal to consumption in the period of time = t plus whatever shocks occurs in the economy (i.e.) political unrest, social movements, oil crises, etc.). In an economy, small shifts in variables such as consumption can cause larger changes because once an economy moves away from equilibrium, it causes a resulting change in other key equations which is no longer optimal. How the economy restores to equilibrium is also a debate amongst economist: Keynesians believe that wages/prices are 'sticky' and thus equilibrium is slow to reoccur after a shock; classicists believe that wages/prices are not sticky so that equilibrium will reestablish itself quickly. The rate at which an economy corrects these shocks will also affect how unstable equilibrium is. Finally, equilibrium can also constantly change due to factors such as technological growth. The economy needs time and information to adjust to these new equilibria and this can cause instability.
What else can I help you with?
Where is the consumer surplus located on a graph depicting market equilibrium?
Consumer surplus is located above the market price and below the demand curve on a graph depicting market equilibrium.
Why market equilibrium is said to be highly unstable one?
cause in real life market never remains at equilibrium, many factors affect market price and quantity
How can one determine the consumer surplus at equilibrium in a market?
To determine the consumer surplus at equilibrium in a market, subtract the price that consumers are willing to pay from the actual market price. This calculation represents the benefit consumers receive from purchasing a good or service at a lower price than they are willing to pay.
What are the factors that determine the equilibrium price and quantity of a substitute good in the market?
The equilibrium price and quantity of a substitute good in the market are determined by factors such as the prices of other goods, consumer preferences, production costs, and overall market demand and supply. When the price of a substitute good increases, consumers may switch to the substitute, affecting the equilibrium price and quantity. Additionally, changes in consumer income and preferences can also impact the equilibrium in the market for substitute goods.
How can one determine the market equilibrium and what factors are involved in finding it?
Market equilibrium is determined by the point where the quantity demanded by consumers equals the quantity supplied by producers. Factors involved in finding market equilibrium include price, demand, supply, and external influences such as government regulations and consumer preferences.
Where is the consumer surplus located on a graph depicting market equilibrium?
Consumer surplus is located above the market price and below the demand curve on a graph depicting market equilibrium.
Why market equilibrium is said to be highly unstable one?
cause in real life market never remains at equilibrium, many factors affect market price and quantity
How can one determine the consumer surplus at equilibrium in a market?
To determine the consumer surplus at equilibrium in a market, subtract the price that consumers are willing to pay from the actual market price. This calculation represents the benefit consumers receive from purchasing a good or service at a lower price than they are willing to pay.
Is the tightrope walker in stable or unstable equilibrium?
Unstable.
What are the factors that determine the equilibrium price and quantity of a substitute good in the market?
The equilibrium price and quantity of a substitute good in the market are determined by factors such as the prices of other goods, consumer preferences, production costs, and overall market demand and supply. When the price of a substitute good increases, consumers may switch to the substitute, affecting the equilibrium price and quantity. Additionally, changes in consumer income and preferences can also impact the equilibrium in the market for substitute goods.
How can one determine the market equilibrium and what factors are involved in finding it?
Market equilibrium is determined by the point where the quantity demanded by consumers equals the quantity supplied by producers. Factors involved in finding market equilibrium include price, demand, supply, and external influences such as government regulations and consumer preferences.
The agreement between the producer and consumer on the price is called the?
The agreement between the producer and consumer on the price is called the equilibrium price. This is the point at which the quantity supplied by the producer matches the quantity demanded by the consumer, resulting in a stable market price.
What factors contribute to the establishment of a competitive equilibrium in the market?
Factors that contribute to the establishment of a competitive equilibrium in the market include supply and demand dynamics, pricing mechanisms, competition among firms, consumer preferences, and government regulations.
How to tell if equilibrium is stable or unstable?
In order to determine if equilibrium is stable or unstable, you can analyze the system's response to small disturbances. If the system returns to its original state after a disturbance, it is stable. If the system moves further away from equilibrium after a disturbance, it is unstable.
Are all objects at equilibrium stable?
No, not all objects at equilibrium are stable. There are two types of equilibrium: stable equilibrium, where a system returns to its original state when disturbed, and unstable equilibrium, where a system moves away from its original state when disturbed. Objects at unstable equilibrium are not stable.
Consumer equilibrium utility approach?
when does consumer attain equilibrium under the utility approach
What is consumer equilibrium?
consumer equilibrium states that consumer maximise his utility with the given income and with the given price or when a consumer getting maximum satisfaction with available resources then he will be in a state of equilibrium.
