ECO 1104 Lecture Notes - Negative Number, Allday, Economic Equilibrium

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: David Gray

Document Summary

The best way to understand an equilibrium is to examine a disequilibrium situation. Case 2: suppose that the transactions price < equilibrium price. Qs < qd, and a shortage emerges. As customers become irritable and aggressive, they are tempted to bid up prices. Price rises, qs rises due to law of supply. Price rises, qs falls due to law of demand. Eventually, qs = qd as equilibrium is restored. There is no further incentive to change. This is an illustration of the price system in action. Notice how this process occurs autonomously (by itself). Back to the example of microcomputers, which are about 30 years old. In 1987, i bought an apple maclntosh 800 k with image writer printer for what in 2013 $ would be about ,600 cn. The price adjusted for quality (which is much superior now) has now dropped to below ,000. Almost all due to technological advances and resulting cost reductions on the.