Intermediate Microeconomics · free preview
Market Equilibrium and Stability
Excess demand, demand minus supply, is a downward function of price whose zero is the equilibrium, and its slope tells whether price adjustment is stable, the discipline behind every comparative-statics move of the course.
1. Excess demand as the engine
Excess demand as the engine
2. Stability
Stability
3. Comparative statics algebra
Comparative statics algebra
4. Why equilibrium at all
Why equilibrium at all
5. The clearing price
Demand Q equals 100 minus 2p, supply Q equals 20 plus 2p. What is the equilibrium?
6. Reading the pressure
At price 15 in this market, what is the pressure and its direction?
7. The stability condition
What condition makes the equilibrium stable under the price-adjustment law?
8. Diagnosing the shift
Observed price rose and quantity fell. Which shock does this market suggest?
9. A demand shift's price
Demand rises to Q equals 120 minus 2p, supply unchanged. Compute the new equilibrium price, and write the number.
10. The new quantity
Same shift, compute the new equilibrium quantity, and write the number.
11. Pressure far below
In the market with demand Q equals 100 minus 2p and supply Q equals 20 plus 2p, what happens at price 10?
12. Pressure above the peak
At price 25 in the same market, what is the pressure?
13. A supply contraction
Supply falls to Q equals 2p, demand unchanged at Q equals 100 minus 2p. What is the new equilibrium?
14. The arrow of adjustment
Under the price-adjustment law with price currently 15 and excess demand of 20, which way does the price move?
15. Shortage size at ten
At price 10, compute the excess demand, quantity demanded minus quantity supplied, and write the number.
16. Quantity after the supply shift
With supply Q equals 2p and demand Q equals 100 minus 2p, compute the equilibrium quantity, and write the number.
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