*Disequilibrium = inequality or absence in equality
1. Cobweb Theory - the market adjusts to equilibrium over time
* NO stable growth
2. Say's Law of Markets (by Jean Baptiste Say) - Production (S) creates its own market (D)
- If D>S then P↑
- Inflation - P↑
- Demand Push v. Cost Pull (i.e. Salary↑ - P↑)
- If D<S, non-satisfaction of needs
- Deflation - reduction in price level (i.e. rollback of prices) - P↓
- Profit P↓
3. Actual price Theory - whatever P is paid is the equilibrium
- D = f(P)
- S= f (P)
- D = a-bP
- a = D-intercept or level of D when P is 0
- b = slope of the D function
Item = FREE good/service
S = a + b P (NOTE: + because direct relationship)
a = s intercept or level of S when P is zero
b = slope of S function
