Please advise what are "Unstable equilibrium" and "stable equilibrium"? Unic Technology is a mainframe computer retailer....

Please advise what are "Unstable equilibrium" and "stable equilibrium"?

Unic Technology is a mainframe computer retailer. In an effort to increase profit, Unic increases the price on their computers by 10%. Unfortunately, their market analysis was incorrect, and more customers left than they expected. As a result, Unic decided its best option was to lower the prices back to the original value. Upon doing so, all the customers returned.

This situation most accurately represents which economic principle:

Unstable equilibrium
Stable equilibrium
Partial equilibrium

Expert Solution

It represents Stable equilibrium.

stable equilibrium - If price is above the equilibrium then there will be surplus in the economy and there will be downward pressure on price as a result price goes back to the equilibrium position, similarly if price is below equilibrium level there will be upside pressure on price and it goes back to the equilibrium level.

Rahul Sunny answered 1 year ago

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