Let us look at A On the left of A Demand > SS So prices will rise and settle with A but if something happens exogenously and we are between the point A and B supply is greater than demand so prices will fall and we will settle down at B. Now something happens exogenously and we are between B and C here Demand is greater than supply so prices will rise and we will reach B again. So B is a stable equilibrium. If we look at the right of point C supply is greater than dd so prices will fall and we will reach C again. But only B is stable from both sides
Please Help. Thanks ! I didn't find the right solution from the internet.
johnnyhenderson replied
418 weeks ago