Equilibrium Analysis in Economics
Equilibrium Analysis in Economics PPT Free Download. Get paper presentation and seminar topics about What is Equilibrium, Partial Market Equilibrium on Equilibrium Analysis in Economics PPT format.
What is Equilibrium?
Equilibrium is a constellation of selected interrelated variables so adjusted to one another that no inherent tendency to change prevails in the model which they constitute.
Some variables are not selected to be in the model
Equilibrium is relevant only to the selected variables and may no longer apply if different variables are included (excluded)
Since the variables are interrelated, all the variables must be in a state of rest if equilibrium is to be achieved
The state of rest refers to the internal forces of the model; external forces (exogenous variables) are assumed fixed
Partial Market Equilibrium
• Constructing the model
An equilibrium condition, behavioral equations, and restrictions must be specified
Qd = Qs
Qd = a – bP (a, b > 0)
Qs = -c + dP (c, d > 0)
• Solving the model
Equilibrium tells us Qd = Qs so we can substitute into the equilibrium equation and solve
a – bP = -c + dP
a + c = bP + dP
a + c = P(b + d)
a + c = P (equilibrium price)
General Equilibrium Model
• Our analysis can extend to n commodities
• There will be an equilibrium condition for each of the n markets
• There will be behavioral equations for each of the n markets
Equilibrium Analysis in Economics Content:
1. What is Equilibrium?
2. Partial Market Equilibrium
3. General Equilibrium Model
4. And more.
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