Unstable Equilibrium and Positive Feedback in Price Dynamics
An unstable equilibrium in a market is a state where a price shock initiates a positive feedback loop, driving the price progressively further from its starting point. This dynamic is represented by a Price Dynamics Curve (PDC) that is steeper than the 45-degree line, meaning its slope is greater than one. A slope greater than one signifies that any price change in a given period () will lead to a larger price change in the subsequent period (). This magnification of the initial disturbance prevents the market from self-correcting and instead leads to escalating price movements.
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Introduction to Macroeconomics Course
Ch.8 Economic dynamics: Financial and environmental crises - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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