Equilibrium: Difference between revisions
Huckelberry (talk | contribs) No edit summary |
Huckelberry (talk | contribs) No edit summary |
||
| Line 3: | Line 3: | ||
'''Equilibrium''' is a concept used to explain price fluctuations. The changing needs and wants of the individuals will cause price movements in goods. These prices tend toward an equilibrium, or [[final price]], where the quantity demanded is equal to the quantity supplied. Equilibrium, although useful to describe price movements, never occurs except temporarily and imperfectly (for example in the 'close' of the [[stock market]]). Market prices, to some economists, are said to be ''in'' equilibrium rather than moving ''toward'' equilibrium. For example, the [[mathematical school]] and the [[efficient market hypothesis]] base their theories on a constant equilibrium. | '''Equilibrium''' is a concept used to explain price fluctuations. The changing needs and wants of the individuals will cause price movements in goods. These prices tend toward an equilibrium, or [[final price]], where the quantity demanded is equal to the quantity supplied. Equilibrium, although useful to describe price movements, never occurs except temporarily and imperfectly (for example in the 'close' of the [[stock market]]). Market prices, to some economists, are said to be ''in'' equilibrium rather than moving ''toward'' equilibrium. For example, the [[mathematical school]] and the [[efficient market hypothesis]] base their theories on a constant equilibrium. | ||
Equilibrium, as a mental tool, explains the fluctuations of market prices. Prices are moved by the "[[invisible hand]]" toward the final or equilibrium price. However, the future equilibrium--and therefore the final price--is also always moving. "The final price," says [[Mises]], "can only be defined by defining the conditions required for its emergence. No definite numerical value in monetary terms or in quantities of other goods can be attributed to it." <ref> | Equilibrium, as a mental tool, explains the fluctuations of market prices. Prices are moved by the "[[invisible hand]]" toward the final or equilibrium price. However, the future equilibrium--and therefore the final price--is also always moving. "The final price," says [[Mises]], "can only be defined by defining the conditions required for its emergence. No definite numerical value in monetary terms or in quantities of other goods can be attributed to it." <ref name="Mises_final_goods">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XVIII. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-04.</ref> Present conditions may suggest how prices will move, but never the magnitude. | ||
==References== | ==References== | ||
Revision as of 05:57, 5 February 2011
Equilibrium is a concept used to explain price fluctuations. The changing needs and wants of the individuals will cause price movements in goods. These prices tend toward an equilibrium, or final price, where the quantity demanded is equal to the quantity supplied. Equilibrium, although useful to describe price movements, never occurs except temporarily and imperfectly (for example in the 'close' of the stock market). Market prices, to some economists, are said to be in equilibrium rather than moving toward equilibrium. For example, the mathematical school and the efficient market hypothesis base their theories on a constant equilibrium.
Equilibrium, as a mental tool, explains the fluctuations of market prices. Prices are moved by the "invisible hand" toward the final or equilibrium price. However, the future equilibrium--and therefore the final price--is also always moving. "The final price," says Mises, "can only be defined by defining the conditions required for its emergence. No definite numerical value in monetary terms or in quantities of other goods can be attributed to it." [1] Present conditions may suggest how prices will move, but never the magnitude.
References
- ↑ Ludwig von Mises. XVIII. The Scope and Method of Catallactics, 5. The State of Rest and the Evenly Rotating Economy, Human Action, online version, referenced 2011-02-04.
Links
- Human Action complete text (pdf)