88 Sentences With "equilibrium price" | Random Sentence Generator

Because nudging the equilibrium price met by supply and demand will just automatically work out perfectly, right?

"This (deal) will help reach an equilibrium price," Del Pino told state television VTV on Monday morning.

For OPEC members, the sustainable equilibrium price is almost always at least $10 higher than the current price.

In other words, it's impossible for supply and demand to reach an equilibrium price — there's only one supplier.

Yet zero is not, as economists put it, the equilibrium price to see a live performance by Jay Leno.

And essentially what that means is that the new equilibrium price in the oil markets is going to be $25.

LIESMAN: SIR, CAN I JUST ASK YOU, DOES THAT MEAN YOU THINK 70 CENTS A BARREL IS AN EQUILIBRIUM PRICE?

Research by the Coalition for a Prosperous America suggests that the dollar may be overvalued by as much as 25.5 percent, compared to its competitive or "equilibrium" price.

Just like any product, under the laws of supply and demand, with lower barriers to entry, greater numbers of higher education suppliers can compete to lower the market equilibrium price.

Professor Arrow proved that their system of equations mathematically cohere: Prices exist that bring all markets into simultaneous equilibrium (whereby every item produced at the equilibrium price would be voluntarily purchased).

Changing levels of supply and demand explain why the price of a commodity goes up or down, but does not explain why the equilibrium price of that commodity is what it is.

"While two Presidents and a Crown Prince are behind policy drivers of oil prices in the near term, they can't push market prices far from equilibrium price levels for too long," Citi wrote.

Oil producers should "let the market forces continue to seek and find that equilibrium price between supply and demand," said Mr. Falih, speaking to a small group of reporters in his penthouse hotel suite.

With an equilibrium price for gold at around $1,200 an ounce over the next year, investors should consider $1,100 an ounce as an entry point if they wish to improve their chances of an attractive future payoff.

Likewise, in the supply-demand diagram, producer surplus is the area below the equilibrium price but above the supply curve. This reflects the fact that producers would have been willing to supply the first unit at a price lower than the equilibrium price, the second unit at a price above that but still below the equilibrium price, etc., yet they in fact receive the equilibrium price for all the units they sell.

In the mid-19th century, engineer Jules Dupuit first propounded the concept of economic surplus, but it was the economist Alfred Marshall who gave the concept its fame in the field of economics. On a standard supply and demand diagram, consumer surplus is the area (triangular if the supply and demand curves are linear) above the equilibrium price of the good and below the demand curve. This reflects the fact that consumers would have been willing to buy a single unit of the good at a price higher than the equilibrium price, a second unit at a price below that but still above the equilibrium price, etc., yet they in fact pay just the equilibrium price for each unit they buy.

The original equilibrium price is $3.00 and the equilibrium quantity is 100. The government then levies a tax of $0.50 on the sellers. This leads to a new supply curve which is shifted upward by $0.50 compared to the original supply curve. The new equilibrium price will sit between $3.00 and $3.50 and the equilibrium quantity will decrease.

Its equilibrium price and quantity are determined by the intersection of this demand curve with the supply curve of the factor of production.

However, if this short-run equilibrium price is sufficiently high, production will be very profitable, and capacity will increase. This shifts the short-run supply schedule to the right, and a new short-run equilibrium price will be obtained. The resulting sequence of short-run equilibria are termed temporary equilibria. The overall system involves two state variables: price and capacity.

Since firms cannot control the activities of other firms that produce the same widget sold within the market, a firm that charges a Price that is higher than the industry's Market Equilibrium Price would lose all business as customers would simply respond by buying their widgets from other competing firms that charge the (lower) Market Equilibrium Price. . This makes Deviation from the Market Equilibrium Price impossible. Perfect competition is commonly characterized by an idealized situation in which all firms within the industry produce exactly comparable goods that are ("Perfect Substitutes"). With the exception of commodity markets, this idealized situation does not typically exist in many actual markets.

An ineffective, non-binding price floor, below equilibrium price A price floor could be set below the free-market equilibrium price. In the first graph at right, the dashed green line represents a price floor set below the free-market price. In this case, the floor has no practical effect. The government has mandated a minimum price, but the market already bears and is using a higher price.

Demand for an item (such as goods or services) refers to the economic market pressure from people trying to buy it. Buyers have a maximum price they are willing to pay and sellers have a minimum price they are willing to offer their product. The point at which the supply and demand curves meet is the equilibrium price of the good and quantity demanded. Sellers willing to offer their goods at a lower price than the equilibrium price receive the difference as producer surplus.

The increase in demand could come from changing tastes and fashions, incomes, price changes in complementary and substitute goods, market expectations, and number of buyers. This would cause the entire demand curve to shift changing the equilibrium price and quantity. Note in the diagram that the shift of the demand curve, by causing a new equilibrium price to emerge, resulted in movement along the supply curve from the point to the point . If the demand decreases, then the opposite happens: a shift of the curve to the left.

A common and specific example is the supply-and-demand graph shown at right. This graph shows supply and demand as opposing curves, and the intersection between those curves determines the equilibrium price. An alteration of either supply or demand is shown by displacing the curve to either the left (a decrease in quantity demanded or supplied) or to the right (an increase in quantity demanded or supplied); this shift results in new equilibrium price and quantity. Economic graphs are presented only in the first quadrant of the Cartesian plane when the variables conceptually can only take on non-negative values (such as the quantity of a product that is produced).

A price floor set above the market equilibrium price has several side-effects. Consumers find they must now pay a higher price for the same product. As a result, they reduce their purchases, switch to substitutes (e.g., from butter to margarine) or drop out of the market entirely.

In most cases the first derivative of excess demand with respect to price is negative, meaning that a higher price leads to lower excess demand. The price of the product is said to be the equilibrium price if it is such that the value of the excess demand function is zero: that is, when the market is in equilibrium, meaning that the quantity supplied equals the quantity demanded. In this situation it is said that the market clears. If the price is higher than the equilibrium price, excess demand will normally be negative, meaning that there is a surplus (positive excess supply) of the product, and not all of it being offered to the marketplace is being sold.

Further, the effect of mandating a higher price transfers some of the consumer surplus to producer surplus, while creating a deadweight loss as the price moves upward from the equilibrium price. A price floor may lead to market failure if the market is not able to allocate scarce resources in an efficient manner.

Marx's concept of value is not intended to be an equilibrium price. He does not assume market equilibrium, but aims to explain how the process of convergence between supply and demand practically occurs, that is, why supply and demand meet at a given price point when a sale is realised in a specific market.

Buyers willing to pay for goods at a higher price than the equilibrium price receive the difference as consumer surplus. The model is commonly applied to wages in the market for labor. The typical roles of supplier and consumer are reversed. The suppliers are individuals, who try to sell (supply) their labor for the highest price.

Over time, SREC markets are designed to find the equilibrium price that encourages enough installation to meet the growing demand set forth by the RPS. Generally speaking, SREC prices are a function of (1) a state's solar alternative compliance payment (SACP), (2) the supply and demand for SRECs within the relevant state, and (3) the term or length over which SRECs are sold.

"Technology systems and technology policy in an evolutionary framework". Cambridge Journal of Economics, 19(1), pp.25-46. In contrast to the evolutionary paradigm, classic political science teaches technology as a static "black box". Similarly, neoclassical economics treats technology as a residual, or exogenous factor, to explain otherwise inexplicable growth (for example, shocks in supply that boost production, affecting the equilibrium price level in an economy).

If the price is lower than the equilibrium price, excess demand will normally be positive, meaning that there is a shortage. Walras' law implies that, for every price vector, the price–weighted total excess demand is 0, whether or not the economy is in general equilibrium. This implies that if there is excess demand for one commodity, there must be excess supply for another commodity.

Meanwhile, suppliers find they are guaranteed a new, higher price than they were charging before. As a result, they increase production. Taken together, these effects mean there is now an excess supply (known as a "surplus") of the product in the market to maintain the price floor over the long term. The equilibrium price is determined when the quantity demanded is equal to the quantity supplied.

He later qualified this in deriving the result that in a model of exchange equilibrium, price ratios would be proportional not only to ratios of "final degrees of utility," but also to costs of production.W. Stanley Jevons (1879, 2nd ed.), The Theory of Political Economy, p. 208.R.D. Collison Brown (1987), "Jevons, William Stanley," The New Palgrave: A Dictionary of Economics, v. 2, pp. 1008–09.

A disequilibrium occurs due to a non-equilibrium price giving a lack of balance between supply and demand. Excess supply is one of the two types of disequilibrium in a perfectly competitive market, excess demand being the other. When quantity supplied is greater than quantity demanded, the equilibrium level does not obtain and instead the market is in disequilibrium. An excess supply prevents the economy from operating efficiently.

The pre-tax equilibrium price is $5.00 with respective equilibrium quantity of 100. The government imposes a 20 per cent tax on the sellers. A new supply curve emerges. It is shifted upward and pivoted to the left and upwards in comparison to the original supply curve and their distance is always 20 per cent of the original price. In the pre-tax equilibrium the distance equals $5.00 x 0.20 = $1.00.

Typically these prices are decreasing; they are given by the individual demand curve, which must be generated by a rational consumer who maximizes utility subject to a budget constraint. Because the demand curve is downward sloping, there is diminishing marginal utility. Diminishing marginal utility means a person receives less additional utility from an additional unit. However, the price of a product is constant for every unit at the equilibrium price.

Drake Bennett, "BusinessWeek": "GM, Ford, and Chrysler: The Detroit Three Are Back, Right?", April 4, 2013. Drake Bennett, "BusinessWeek": " Americans Should Buy U.S. Cars, Period ", "The Debate Room", April 4, 2013. Individual Competitive firms (on the extreme left and extreme right) are "Price Takers"; who are forced to accept the overall "Equilibrium Price" set by Total Consumer Demand and the quantity all firms Supply within the Industry's Market.

Using the temporary equilibrium method, it can be reduced to a system involving only state variable. This is possible because each short-run equilibrium price will be a function of the prevailing capacity, and the change of capacity will be determined by the prevailing price. Hence the change of capacity will be determined by the prevailing capacity. The method works if the price adjusts fast and capacity adjustment is comparatively slow.

Investors can only reduce a portfolio's exposure to systematic risk by sacrificing expected returns. An important concept for evaluating an asset's exposure to systematic risk is beta. Since beta indicates the degree to which an asset's return is correlated with broader market outcomes, it is simply an indicator of an asset's vulnerability to systematic risk. Hence, the capital asset pricing model (CAPM) directly ties an asset's equilibrium price to its exposure to systematic risk.

Asset bubbles are now widely regarded as a recurrent feature of modern economic history dating back as far as the 1600s. The Dutch Golden Age's Tulipmania (in the mid-1630s) is often considered the first recorded economic bubble in history. Both the boom and the bust phases of the bubble are examples of a positive feedback mechanism (in contrast to the negative feedback mechanism that determines the equilibrium price under normal market circumstances).

The vertical distance between the two supply curves is equal to the amount of tax in per cent. The effective price to the sellers is again lower by the amount of the tax and they will supply the good as if the price were lower by the amount of tax. Last, the total impact of the tax can be observed. The equilibrium price of the good rises and the equilibrium quantity decreases.

Otherwise stated, producers will be willing to supply more wheat at every price and this shifts the supply curve outward, to —an increase in supply. This increase in supply causes the equilibrium price to decrease from to . The equilibrium quantity increases from to as consumers move along the demand curve to the new lower price. As a result of a supply curve shift, the price and the quantity move in opposite directions.

The goods are sold in the products markets. In most respects these markets work in the same manner as each other. Price is determined by the interaction of supply and demand; firms attempt to maximize profits, and factors can influence and change the equilibrium price and quantities bought and sold, and the laws of supply and demand hold. In perfectly competitive markets firms can "purchase" as many inputs as they need at the market rate.

At each price point, a greater quantity is demanded, as from the initial curve to the new curve . In the diagram, this raises the equilibrium price from to the higher . This raises the equilibrium quantity from to the higher . (A movement along the curve is described as a "change in the quantity demanded" to distinguish it from a "change in demand," that is, a shift of the curve.) The increase in demand has caused an increase in (equilibrium) quantity.

According to a research conducted by combining mathematics and economics, decisions of pricing depends on the substitutability between the products depends to the degree of how much differentiated the firms’ products are. No firm can charge a higher price if the products are good substitutes and vice versa. The lower non-cooperative equilibrium price the lower the differentiation. For this reason, firms might jointly raise prices above the equilibrium or competitive level by coordination between themselves.

He regards as misguided since, in his view, all economic policy inevitably affects income distribution. He discusses challenges in achieving equilibrium between aggregate supply and aggregate demand, and how enterprise of any type has a natural tendency to preserve its share of consumption of value added in the face of oscillations in equilibrium price while leaving labour to adjust to the reduced share remaining when the equilibrium price falls, leading to real wage declines. He discusses potential solutions proposed by others including solidarity wage policy and social investment. While he notes that perfectly competitive markets are elusive in any setting, in his view the political culture of Greece at the time placed a higher premium on political power relative to private property and other instruments of competition as an end to achieving economic goals; therefore, the application in Greece of principles that had worked or seemed to be working in other countries would be less efficient and effective in Greece than they were elsewhere, which should be borne in mind when composing policy prescriptions for the country.

Protesters call for an increased legal minimum wage as part of the "Fight for $15" effort to require a $15 per hour minimum wage in 2015. A government-set minimum wage is a price floor on the price of labour. A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective.

In this situation, producers would not be able to sell all the televisions they produce at the desired price of $600. This will induce them to reduce their price in order to make the product more attractive for the buyers. In response to the reduction in the price of the product, consumers will increase their quantity demanded and producers will not produce as many as before. The market will eventually become balanced as the market is transitioning to an equilibrium price and quantity.

Protesters call for an increased legal minimum wage as part of the "Fight for $15" effort to require a $15 per hour minimum wage in 2015. A government-set minimum wage is a price floor on the price of labour. A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective.

Most markets fall between these two extremes, and ultimately the incidence of tax is shared between producers and consumers in varying proportions. In this example, the consumers pay more than the producers, but not all of the tax. The area paid by consumers is obvious as the change in equilibrium price (between P without tax and P with tax); the remainder, being the difference between the new price and the cost of production at that quantity, is paid by the producers.

Overpricing can be said to be a necessary, but insufficient indicator that a bubble exists. Overpricing is defined more widely than a bubble. An asset may be overpriced without there being a bubble, but you cannot have a (positive) bubble without overpricing. Over- or underpricing may simply be defined as a deviation from the equilibrium price. DiPasquale and Wheaton (1994)DiPasquale, D. and Wheaton, W.C. (1994), “Housing market dynamics and the future of housing prices”, Journal of Urban Economics , Vol. 35, pp. 1-27.

If bakers don't differ in tastes from others, the demand for bread might be affected by a change in bakers' wages, with a consequent effect on the price of bread. Calculating the equilibrium price of just one good, in theory, requires an analysis that accounts for all of the millions of different goods that are available. It is often assumed that agents are price takers, and under that assumption two common notions of equilibrium exist: Walrasian, or competitive equilibrium, and its generalization: a price equilibrium with transfers.

Criticisms against the implementation living wage laws have taken similar forms to those against minimum wage. Economically, both can be analyzed as a price floor for labor. A price floor, if above the equilibrium price and thus effective, necessarily leads to a "surplus". In the context of a labor market, this means that unemployment goes up as the number of employers willing to hire people at a "living wage" is below the number they would be willing to hire at the equilibrium wage price.

Changes in market equilibrium: Practical uses of supply and demand analysis often center on the different variables that change equilibrium price and quantity, represented as shifts in the respective curves. Comparative statics of such a shift traces the effects from the initial equilibrium to the new equilibrium. Demand curve shifts: When consumers increase the quantity demanded at a given price, it is referred to as an increase in demand. Increased demand can be represented on the graph as the curve being shifted to the right.

If the quantity supplied decreases, the opposite happens. If the supply curve starts at , and shifts leftward to , the equilibrium price will increase and the equilibrium quantity will decrease as consumers move along the demand curve to the new higher price and associated lower quantity demanded. The quantity demanded at each price is the same as before the supply shift, reflecting the fact that the demand curve has not shifted. But due to the change (shift) in supply, the equilibrium quantity and price have changed.

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D): the diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product In capitalist economic structures, supply and demand is an economic model of price determination in a market. It postulates that in a perfectly competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an economic equilibrium for price and quantity. The basic laws of supply and demand, as described by David Besanko and Ronald Braeutigam, are the following four: # If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price. # If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.

The basic adjustment mechanism is a stock/flow model to reflect the fact that about 98% the market is existing stock and about 2% is the flow of new buildings. right In the adjacent diagram, the stock of housing supply is presented in the left panel while the new flow is in the right panel. There are four steps in the basic adjustment mechanism. First, the initial equilibrium price (Ro) is determined by the intersection of the supply of existing housing stock (SH) and the demand for housing (D).

For the consumer, that point comes where marginal utility of a good, net of price, reaches zero, leaving no net gain from further consumption increases. Analogously, the producer compares marginal revenue (identical to price for the perfect competitor) against the marginal cost of a good, with marginal profit the difference. At the point where marginal profit reaches zero, further increases in production of the good stop. For movement to market equilibrium and for changes in equilibrium, price and quantity also change "at the margin": more-or-less of something, rather than necessarily all-or-nothing.

In the field of economics he reviewed the work on oligopoly theory, specifically the Cournot Competition Model (1838) of French mathematician Antoine Augustin Cournot. His Bertrand Competition Model (1883) argued that Cournot had reached a very misleading conclusion, and he reworked it using prices rather than quantities as the strategic variables, thus showing that the equilibrium price was simply the competitive price. His book Thermodynamique points out in Chapter XII, that thermodynamic entropy and temperature are only defined for reversible processes. He was one of the first people to point this out.

A market- clearing price is the price of a good or service at which quantity supplied is equal to quantity demanded, also called the equilibrium price. The theory claims that markets tend to move toward this price. For a one-time sale of goods, supply is fixed, so the market-clearing price is simply the price at which all items can be sold, but no lower. (Demand can be adjusted by setting the price appropriately, perhaps through an auction mechanism.) In this case, the marketplace is literally cleared of all goods.

The prevalent theory of financial markets during the second half of the 20th century has been the efficient market hypothesis (EMH) which states that all public information is incorporated into asset prices. Any deviation from this true price is quickly exploited by informed traders who attempt to optimize their returns and it restores the true equilibrium price. For all practical purposes, then, market prices behave as though all traders were pursuing their self-interest with complete information and rationality. Toward the end of the 20th century, this theory was challenged in several ways.

The economist Milton Friedman, advocate of laissez-faire capitalism, believed that unionization frequently produces higher wages at the expense of fewer jobs, and that, if some industries are unionized while others are not, wages will decline in non- unionized industries.Milton & Rose Friedman, Free to Choose. Chicago Press, 1979 By raising the price of labor, the wage rate, above the equilibrium price, unemployment rises. This is because it is no longer worthwhile for businesses to employ those laborers whose work is worth less than the minimum wage rate set by the unions.

However, in the second period the monopolist will face a new residual demand curve (Q − Q1) and so will produce quantity where the new marginal revenue is equal to the marginal cost, which is at the competitive market price. There is then an incentive for consumers to delay purchase of the good as they realize that its price will decrease over time. If buyers are patient enough they will not buy until the price falls and so durable goods monopolists face a horizontal demand curve at the equilibrium price and so will have no market power.

The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market). Governments use price floors to keep certain prices from going too low. Two common price floors are minimum wage laws and supply management in Canadian agriculture. Other price floors include regulated US airfares prior to 1978 and minimum price per-drink laws for alcohol.

The item traded may be a tangible product such as apples or a service such as repair services, legal counsel, or entertainment. In theory, in a free market the aggregates (sum of) of quantity demanded by buyers and quantity supplied by sellers may reach economic equilibrium over time in reaction to price changes; in practice, various issues may prevent equilibrium, and any equilibrium reached may not necessarily be morally equitable. For example, if the supply of healthcare services is limited by external factors, the equilibrium price may be unaffordable for many who desire it but cannot pay for it. Various market structures exist.

In 1925, Sraffa wrote about returns to scale and perfect competition. In the 1926 article, The Laws of Returns under Competitive Conditions, published in The Economic Journal, Sraffa resumes and develops his work of 1925 to show the inconsistency of the Marshallian theory of partial equilibrium, according to which, in competition for each good: # The equilibrium price is determined by the intersection of the demand curve and that of the supply. The supply curve is symmetrical to that of the demand. # As the quantity produced by the firm increases, there are initially increasing returns and, beyond a certain point, decreasing returns.

Joseph Schumpeter, The Process of Creative Destruction (1942) This led Schumpeter to argue that monopolies did not need to be broken up (as with Standard Oil) because the next gale of economic innovation would do the same. Contrasting with the allocatively, productively and dynamically efficient market model are monopolies, oligopolies, and cartels. When only one or a few firms exist in the market, and there is no credible threat of the entry of competing firms, prices rise above the competitive level, to either a monopolistic or oligopolistic equilibrium price. Production is also decreased, further decreasing social welfare by creating a deadweight loss.

If the demand starts at , and decreases to , the equilibrium price will decrease, and the equilibrium quantity will also decrease. The quantity supplied at each price is the same as before the demand shift, reflecting the fact that the supply curve has not shifted; but the equilibrium quantity and price are different as a result of the change (shift) in demand. Supply curve shifts: When technological progress occurs, the supply curve shifts. For example, assume that someone invents a better way of growing wheat so that the cost of growing a given quantity of wheat decreases.

In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks) over a certain period of time. On the other side of the balance sheet the fair value of a liability is the amount at which that liability could be incurred or settled in a current transaction. Topic 820 emphasizes the use of market inputs in estimating the fair value for an asset or liability.

This is negative if and only if g – b > 0, in which case the demand intercept parameter a positively influences the price. So we can say that while the direction of effect of the demand intercept on the equilibrium price is ambiguous when all we know is that the reciprocal of the supply curve's slope, g, is negative, in the only relevant case (in which the price actually goes to its new equilibrium value) an increase in the demand intercept increases the price. Note that this case, with g – b > 0, is the case in which the supply curve, if negatively sloped, is steeper than the demand curve.

If no minimum wage is in place, wages will adjust until quantity of labor demanded is equal to quantity supplied, reaching equilibrium, where the supply and demand curves intersect. Minimum wage behaves as a classical price floor on labor. Standard theory says that, if set above the equilibrium price, more labor will be willing to be provided by workers than will be demanded by employers, creating a surplus of labor, i.e. unemployment. The economic model of markets predicts the same of other commodities (like milk and wheat, for example): Artificially raising the price of the commodity tends to cause an increase in quantity supplied and a decrease in quantity demanded.

Minimum Wage in the Labour Market According to neoclassical economic theory, the forces of supply and demand will move into equilibrium and determine the market clearing wage in the labour market. At the market clearing wage there is no unemployment as the number of workers seeking employment and the number of jobs being offered by firms are equal. The minimum wage acts a price floor which prevents the market from reaching equilibrium. If the minimum wage exceeds the equilibrium price in the labour market, it will result in an excess in supply of labour as more workers look for employment because they have the opportunity to earn a higher wage.

The extra money someone would be willing to pay for the number units of a product less than the equilibrium quantity and at a higher price than the equilibrium price for each of these quantities is the benefit they receive from purchasing these quantities. For a given price the consumer buys the amount for which the consumer surplus is highest. The consumer's surplus is highest at the largest number of units for which, even for the last unit, the maximum willingness to pay is not below the market price. Consumer surplus can be used as a measurement of social welfare, first shown by Willig (1976).

The generation of economists that followed Keynes, the neo-Keynesians, created the "neoclassical synthesis" by combining Keynes's macroeconomics with neoclassical microeconomics. Neo-Keynesians dealt with two microeconomic issues: first, providing foundations for aspects of Keynesian theory such as consumption and investment, and, second, combining Keynesian macroeconomics with general equilibrium theory. (In general equilibrium theory, individual markets interact with one another and an equilibrium price exists if there is perfect competition, no externalities, and perfect information.) Paul Samuelson's Foundations of Economic Analysis (1947) provided much of the microeconomic basis for the synthesis. Samuelson's work set the pattern for the methodology used by neo-Keynesians: economic theories expressed in formal, mathematical models.

A regular economy is an economy characterized by an excess demand function which has the property that its slope at any equilibrium price vector is non- zero. In other words, if we graph the excess demand function against prices, then the excess demand function "cuts" the x-axis assuring that each equilibrium is locally unique. Local uniqueness in turn permits the use of comparative statics - an analysis of how the economy responds to external shocks - as long as these shocks are not too large. An important result due to Debreu (1970) states that almost any economy, defined by an initial distribution of consumers' endowments, is regular.

In his views the positivist analysis of economic factors (considered quantitatively as measurable entities interacting in a closed system governed by functional relationships) was only one-sided. A comprehensive economic analysis should drive to insights into the essence of things and to assess effectiveness. Thus a price doctrine explains the how price forms and how the equilibrium price originates, but also the why of price formation and equilibrium, and their effectiveness in practice. According to this practical criterion to evaluate comparative efficiency, Cobbenhagen saw the immediate and material economic prosperity of society as goals in light of a higher ultimate end, which to him was religious.

A supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level. In the short run, an economy-wide negative supply shock will shift the aggregate supply curve leftward, decreasing the output and increasing the price level.. For example, the imposition of an embargo on trade in oil would cause an adverse supply shock, since oil is a key factor of production for a wide variety of goods. A supply shock can cause stagflation due to a combination of rising prices and falling output.

His more recent work utilizes tools of game theory and industrial organization to derive equilibrium strategies in network industries, mergers, auctions, and contests. Much of this research concerns pricing strategies in oligopoly environments where consumers view the products sold by different firms to be close substitutes. Among other things, it shows that optimal pricing strategies by firms and information “gatekeepers” can lead to equilibrium price dispersion when firms have identical costs, shoppers are well-informed, and firms’ products are perceived to be identical. Many of these pricing strategies are discussed in his best-selling managerial economics textbook (Managerial Economics and Business Strategy, 7th Ed.), and are taught to business students around the world.

The primary action of buffer stocks, creating price stability, is often combined with other mechanisms to meet other goals such as the promotion of domestic industry. That is achieved by setting a minimum price for a certain product above the equilibrium price, the point at which the supply and demand curves cross, which guarantees a minimum price to producers, encouraging them to produce more, thus creating a surplus ready to be used as a buffer stock. The price stability itself may also tempt firms into the market, further boosting supply. The upside is security of supply (such as food security); the downside is huge stockpiles, or in other cases, destruction of commodities.

According to Classical and Neo Classical Economic thought, firms in a perfectly competitive market are price takers because no firm can charge a price that is different from the equilibrium price set within the entire industry's perfectly competitive market. Since a competitive market has many competing firms, a customer can just easily buy widgets from any of the competing firms. Competing firms in a market essentially (each) face its own horizontal demand curve that is fixed at a single Price established by Market Equilibrium for the entire Industry as a whole. Each firm in a Competitive Market will have buyers for its product as long as the firm charges 'no more than' the 1 single Price.

In the simple supply and demand model, a change in consumer tastes is unexplained by the model and imposes an exogenous change in demand that leads to a change in the endogenous equilibrium price and the endogenous equilibrium quantity transacted. Here the exogenous variable is a parameter conveying consumer tastes. Similarly, a change in the consumer's income is exogenously given, outside the model, and appears in the model as an exogenous change in demand. In the LM model of interest rate determination, the supply of and demand for money determine the interest rate contingent on the level of the money supply, so the money supply is an exogenous variable and the interest rate is an endogenous variable.

Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources. However, in many countries around the world governments seek to intervene in the free market in order to achieve certain social or political agendas. Governments may attempt to create social equality or equality of outcome by intervening in the market through actions such as imposing a minimum wage (price floor) or erecting price controls (price ceiling). Other lesser-known goals are also pursued, such as in the United States, where the federal government subsidizes owners of fertile land to not grow crops in order to prevent the supply curve from further shifting to the right and decreasing the equilibrium price.

One can explain this alternately as the price not adjusting down—the price is too high, with supply being too high, or alternatively demand being too low, or by the theory of an equilibrium price not holding—the price at which sellers will sell is higher than the price at which buyers will buy. Prior to the crisis, banks and other financial institutions had invested significant amounts of money in complicated financial assets, such as collateralized debt obligations and credit default swaps. The value of these assets was very sensitive to economic factors, such as housing prices, default rates, and financial-market liquidity. Prior to the crisis, the value of these assets had been estimated, using the prevailing economic data.

Limits to arbitrage is a theory in financial economics that, due to restrictions that are placed on funds that would ordinarily be used by rational traders to arbitrage away pricing inefficiencies, prices may remain in a non-equilibrium state for protracted periods of time. The efficient- market hypothesis assumes that whenever mispricing of a publicly traded stock occurs, an opportunity for low-risk profit is created for rational traders. The low-risk profit opportunity exists through the tool of arbitrage, which, briefly, is buying and selling differently priced items of the same value, and pocketing the difference. If a stock falls away from its equilibrium price (let us say it becomes undervalued) due to irrational trading (noise traders), rational investors will (in this case) take a long position while going short a proxy security, or another stock with similar characteristics.

On the basis of equilibrium price theory, Marshall established the theory of distribution according to the factors of production, and the prices of the factors of production also depend on their respective equilibrium prices. These factors of production belong to the owners of labor, land, capital and enterprise organizations. Xiaokai Yang and other economists adopted the inframarginal analysis method to construct the architecture of New Classical Economics on the basis of sublating Neoclassical Economics. Emerging classical economics from the perspective of labor division evolution, using nonlinear programming and other than the classical mathematical programming methods, will be the new classical economics in the abandoned Classical Economics economic thoughts about the division of labor and specialization, into decision making and equilibrium model, as to explain the root of all economic activity, breaking the traditional barriers between macro and micro economics.

Price is arrived at by adding a 'costing margin' to estimated average direct cost with this margin being calculated on the basis of estimates of 'normal' output and the profit-that can be obtained without long run loss of custom due to competition. If there is an 'equilibrium', about which doubts are raised, it is the equilibrium price in the industry price rather than an equilibrium for an individual firm's output at a level where marginal cost equals marginal revenue. The share of the market share of each firm will depend on dynamic factors that determine the amount that the firm is able to sell at the going industry price. Thus, although large firms are thought likely in fact to be multiproduct each industry is analysable independently of the number of other industries in which a firm is active.