Stable Equilibrium

Stabilizing Negative Feedback of Arctic Sea Ice

A city's housing market is in a state of balance with stable rental prices. A large company suddenly opens a new headquarters in the city, causing a rapid influx of new residents and driving average rental prices up. Which of the following scenarios best illustrates a process that would counteract this initial price increase and push the market back toward a stable state?

Market Price Stabilization

Imagine the global market for coffee beans is in a stable state. A new health study is published that dramatically increases consumer demand for coffee, causing the price of coffee beans to rise sharply. Arrange the following events in the correct sequence to illustrate the process that would counteract this initial price shock and push the market back towards a stable, long-term price level.

Labor Market Stabilization

Analyzing Economic Stability Mechanisms

A home thermostat is set to 70°F. When the room temperature rises to 72°F, the thermostat activates the air conditioning to cool the room back down. This process is an example of a system that amplifies the initial temperature change.

In any stable system, an initial change often triggers a counteracting response that pushes the system back toward its original state. For each economic scenario described below, match the initial change with the most likely counteracting response that would work to restore balance.

In a stable ecosystem, a sudden increase in the predator population leads to a decrease in the prey population. This reduction in the food source then causes the predator population to decline, allowing the prey population to recover. This entire cycle is a self-correcting process where the initial disturbance is ultimately ________, pushing the system back towards its original balance.

A balancing process is one where an initial change in a system triggers a response that counteracts the original change, pushing the system back toward a stable state. Which of the following scenarios does NOT describe such a balancing process?

In a competitive market for a popular new type of gadget, the first company to market enjoys unusually high profits. This success attracts several new companies to enter the market with similar products. Which statement best analyzes the process that works to stabilize profits in this market over the long term?