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Explain the types of equilibrium?

Explain the types of equilibrium?

Answers

Types of equilibrium include;

1. Stable equilibrium: if there is a force that disrupts the market equilibrium, then there would be adjustments that bring back to the initial equilibrium. This type of equilibrium is well explained in the previous section.

2. Unstable equilibrium: this occurs when the deviation from the equilibrium position tend to push the market further away from the equilibrium conditions of unstable equilibrium occurs when the demand curve is positively sloped as in the case of a giffen good or when the supply curve is negatively sloped as in the case of labor supply.


3. Neutral equilibrium:- this occurs when the initial equilibrium is disturbed and the forces of disturbances lead to a new equilibrium point. It may occur due to shift of either demand or supply curve, and through effects of taxes etc.

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Kalis answered the question on March 23, 2018 at 13:37

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