By: Trystan Smith, Haylee Taylor, and Michael
A condition or state in which economic forces are balanced. These economic variables will be unchanged from their equilibrium values in the absence of external influences. Economic equilibrium may also be defined as the point where supply equals demand for a product – the equilibrium price is where the hypothetical supply and demand curves intersect.
Equilibrium Price- Price at which the number of units produced equals the number of units sold.
*Neither the buyer nor the seller knows the final price, so they use a strategy called trial and error to find the equilibrium.
You should know what demand and supply curves are but since it connected to our subject we decided to brush up on the meanings. A Supply Curve is a graph of the quantity supplied of a good at various prices and a demand curve is a graph showing how the demand for a commodity or service varies with changes in its price.
When people's strategies are best responses to each other, in other words, when no one would choose to change their plans if everyone else's plans stayed fixed.
John Forbes Nash Jr.
Walrasian Equilibrium is when prices adjust so that all markets clear. In other words, supply and demand are in equilibrium for all goods that are in the economy. Walrasian equilibrium also contains the subtler idea that people's plans are in equilibrium; my plan takes your plan into account, and your plan takes my plan into account
Rational Expectations Equilibrium is kind of like a Walrasian only with the uncertainty towards the future. Originally proposed by John F. Muth and it became more influential when Robert Lucas Jr. began to use it.
Steady States is where either nothing in the economy in changing, or where things change at constant long term, trending rates.