Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

32 DEMAND, SUPPLY, AND EQUILIBRIUM: AN OVERVIEW [CHAP. 2
(b)
Table 2.19
P x ($) QD x QS x
6 0 120,000
5 20,000 100,000
4 40,000 80,000
3 60,000 60,000
2 80,000 40,000
1 100,000 20,000
0 120,000 0
Equilibrium
(c)
Fig. 6-20
(d ) QD x ¼ QS x
120,000 20,000P x ¼ 20,000P x
120,000 ¼ 40,000P x
P x ¼ $3 (equilibrium price)
QD x ¼ 120,000 20,000(3) or QS x ¼ 20,000(3)
¼ 60,000 (unit of X) ¼ 60,000 (units of X)
2.18 (a) Is the equilibrium condition in Problem 2.17 stable? Why? (b) Define unstable equilibrium and
metastable equilibrium.
(a)
The equilibrium condition in Problem 2.17 is stable for the following reason. At prices above the equilibrium
price, the quantity supplied exceeds the quantity demanded. A surplus results and the price is bid down toward
the equilibrium level. At prices below the equilibrium level, the quantity demanded exceeds the quantity supplied.
A shortage of the commodity arises and the price is bid up toward the equilibrium level. This is reflected
in Table 2.20 and Fig. 2-21.
Table 2.20
P x ($) QD x QS x
Pressure on
Price
6 0 120,000 downward
5 20,000 100,000 downward
4 40,000 80,000 downward
3 60,000 60,000 Equilibrium
2 80,000 40,000 upward
1 100,000 20,000 upward
0 120,000 0 upward