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Stable vs unstable equilibrium

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Stable vs unstable equilibrium

Asd1995
286 posts


Which of these equilibria are stable?
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Re: Stable vs unstable equilibrium

Daffodils
93 posts
B
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Re: Stable vs unstable equilibrium

Asd1995
286 posts
Ab samjhaa bhi do pls
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Re: Stable vs unstable equilibrium

Rajesh
49 posts
In reply to this post by Asd1995
i think it should be a, thinking supply curve same as MC Curve, the producer will try to maximize its surplus, which he can maximize at A..C will be stable only if: Area enclosed between supply curve and BC> Area enclosed between supply curve and AB. (not sure of the ans though)
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Re: Stable vs unstable equilibrium

Asd1995
286 posts
Its B, that is confirmed.
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Re: Stable vs unstable equilibrium

Algaeconomics
141 posts
In reply to this post by Asd1995
Let us look at A
On the left of A Demand > SS
So prices will rise and settle with A but if something happens exogenously and we are between the point A and B supply is greater than demand so prices will fall and we will settle down at B.
Now something happens exogenously and we are between B and C here Demand is greater than supply so prices will rise and we will reach B again. So B is a stable equilibrium.
If we look at the right of point C supply is greater than dd so prices will fall and we will reach C again.
But only B is stable from both sides