4.11.12

MARSHALLIAN AND WALRASIAN STABILITY.

As long as the demand curve slopes downward, and the supply curve slopes upward, an equilibrium perturbed will be an equilibrium restored.  In the presence of excess demand at the old price after perturbation, the equilibrium is restored at a higher price.

Let the perturbation be the consequence of a negative supply shock and a positive demand shock, though, and the higher price makes people unhappy.  Thus we see allegations of price gouging, and states passing anti-price-gouging laws.  There's not as much consensus among economists of the efficiency-enhancing properties of price movements as one might suspect, either.

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