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A price-budget-line change that kept a consumer in equilibrium on the same indifference curve: in Fig. 1 would reduce quantity demanded of a good smoothly as price rose relatively for that good. in Fig. 2 would have either no effect on quantity demanded of either good (at one end of the budget constraint ) or would change quantity demanded from ...
In most simple microeconomic stories of supply and demand a static equilibrium is observed in a market; however, economic equilibrium can be also dynamic. Equilibrium may also be economy-wide or general, as opposed to the partial equilibrium of a single market. Equilibrium can change if there is a change in demand or supply conditions.
Local nonsatiation (LNS [2]) is often applied in consumer theory, a branch of microeconomics, as an important property often assumed in theorems and propositions.Consumer theory is a study of how individuals make decisions and spend their money based on their preferences and budget.
Market equilibrium occurs when the demand of a good at the equilibrium price is equal to the supply of the good. If prices are deemed "too high" by the consumers, supply will exceed demand, and sellers will have to reduce their prices until the market clears (i.e., equilibrium is reached).
At competitive equilibrium, the value society places on a good is equivalent to the value of the resources given up to produce it (marginal benefit equals marginal cost). This ensures allocative efficiency : the additional value society places on another unit of the good is equal to what society must give up in resources to produce it.
In microeconomics, a consumer's Marshallian demand function (named after Alfred Marshall) is the quantity they demand of a particular good as a function of its price, their income, and the prices of other goods, a more technical exposition of the standard demand function.
The non-derivative component of the income effect is a measure of a consumer's existing demand for the good, meaning that if a consumer spends a large amount of his income on an inferior good, then a price increase could cause the income effect to dominate the substitution effect.
The transition from the short-run to the long-run may be done by considering some short-run equilibrium that is also a long-run equilibrium as to supply and demand, then comparing that state against a new short-run and long-run equilibrium state from a change that disturbs equilibrium, say in the sales-tax rate, tracing out the short-run ...