Draw A Set Of Reaction Curves That Result In An Unstable Equilibrium show clear and graph
To draw a set of reaction curves that result in an unstable equilibrium, we need to understand what an unstable equilibrium is.
An equilibrium is a state where the forces or influences in a system are balanced, resulting in no change or movement. An unstable equilibrium, on the other hand, is a state where a small disturbance or perturbation can disrupt the balance, causing the system to move away from the equilibrium point.
Now, let's consider a simple example to illustrate this. Suppose we have a system where the equilibrium point is represented by the intersection of two reaction curves: supply and demand.
1. Start by drawing a vertical axis, representing the price, and a horizontal axis, representing the quantity.
2. Draw the supply curve, which illustrates the quantity of a product that producers are willing to offer at different prices. The supply curve has a positive slope, typically moving upwards from left to right.
3. Draw the demand curve, which represents the quantity of a product that consumers are willing to purchase at different prices. The demand curve has a negative slope, typically moving downwards from left to right.
4. The stable equilibrium occurs where the supply and demand curves intersect. In a stable equilibrium, any small deviation from the equilibrium point results in a force that pushes the system back towards the equilibrium.
5. To create an unstable equilibrium, we need to draw reaction curves that cause the system to move away from the equilibrium when disturbed. This can be achieved by having the reaction curves diverge away from the equilibrium point.
- Start by drawing a new supply curve that shifts slightly upwards, parallel to the original supply curve. This curve represents a higher level of supply at each price level.
- Then draw a new demand curve that shifts slightly downwards, parallel to the original demand curve. This curve represents a lower level of demand at each price level.
6. The new reaction curves will intersect at a new equilibrium point, which is not stable. If there is a small disturbance or shock to the system, it will move away from this point, either towards higher prices and lower quantity (if the supply curve dominates) or towards lower prices and higher quantity (if the demand curve dominates).
7. Label the stable equilibrium point and the unstable equilibrium point on the graph to differentiate them.
Remember, this is a simplified example to help you understand the concept of an unstable equilibrium. In reality, economic systems are more complex and influenced by various factors.