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The first model has an equilibrium price of
$40 and an equilibrium quatity of 40. If the system is
shocked out of equilibrium it will oscillate around the
equilibrium. The system is stable because it eventually
returns to equilibrium.
to download the appropriate
spreadsheet.
The second model has an equilibrium price
of $40 but an equilibrium quantity of 80. When shocked
this model also oscillates, but rather than return to
equilibrium its oscillations keep getting bigger and it gets
further and further away from equilibrium. This is an
unstable model.
Clearly the stability of the model depends
on the slopes of both the demand and supply curves.
To download a spreadsheet
that allows you to explore this relationship
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