Stable matching and fixed points in trading - Myassignmenthelp.Com

Question: Discuss about the Stable matching and fixed points in trading. Answer: Introduction This report deal with the study of Economic Equilibrium and it discuss in detail what a stable Economic Equilibrium entails. Economic equilibrium is a situation where by economic forces remained in a balance state. The paper also provides the assessment of Australian economy, US economy and the Chinese economy. The last part is the general conclusion. The concept of a stable economic equilibrium Stable economic equilibrium is a situation where there is an imbalance in the market which is cause by the following factors: change in price, changes in quantity supplied and changes in quantity demanded. The actual changes in quantity remove the surplus or shortage in order to put equilibrium balance a constant state in the market (Adachi, 2017). A real example of stable economy is market equilibrium. Nature of aggregate demand This model describes the nature surrounding aggregate demand curve. The curve explains equilibrium that exists in the market for commodities in form of Y and r. The curve is sloping downward because as investment increases, the interest rate falls, hence increasing output. Aggregate demand identifies the quantity of commodities that will be bought at a given price level. DD shows negatively tilted demand curve and SS represent positively tilted supply curve. Intersection point where demand and supply meet is the equilibrium (E). This is the point where demand and supply are in balance. (OQ) represent the equilibrium quantity and (OQ) is the equilibrium supply (Ikeda, Murota, Takayama, 2017). This provides a good example of stable equilibrium in regard to economics. Long run and short run aggregate. Long run is the actual stage in which fixed factors of production are unavailable; hence there exist no constraints that prevents change in the output level. It is the time period when contractual wages rates, price level and expectation modify fully to that of the economy, while in short run these variables sometimes did not adjust fully. Short run aggregate This is where all production takes place; profit-maximizing firms perform the following: If marginal revenue is more than marginal cost production is being increased If marginal revenue is less than marginal cost production is being decrease If price per unit is greater than average variable cost firm continue with production If price of output is less than average variable cost the firm shut down Calculation of the competitive equilibrium price In order to determine to determine equilibrium price, we plot demand and supply curve. Example: Qs = 125 + 1.5 .P Qd = 189 2.25 .P Qs = Qd 125 + 1.5 .P = 189 2.25. P (1.5 + 2.25). P = (189 125) P = 64/3.75 P = 17.067 Supply and shifting factors The supply curve may shift left or right depending on variations in production and other related factors. This may then cause a lower or higher in the quantity being supplied at a specified price. Supply curves deals with the quantity supplied and prices with the assumption that other factors remains constant. Mechanism of adjustment in economy If economy increases the growth of the demand and product, interest rate always rise, because currency tends to increase in value, and higher demand for credit. This other factors will slow economic growth: when interest rate increased, it will depress consumption of investment and durable goods, and the increase in value of currency lower export and increases exports. Assessment of the US equilibrium economy Inflation and Unemployment: The unemployment rate in US has been decelerating in the past numerous years, starting at 10% for the past 15 years before falling in 2016 to 5%. The current lower number of unemployment rate is the major reason for use of fiscal policy and monetary policy. Inflation rate in US always happened during economic expansion, quantity demanded for commodity in the economy began to rise higher than the economys possible output. The intention of monetary policy is to encouraged price stability and maximum employment. Therefore because of the many factors concerning inflation, unemployment rate and fiscal and monetary policy meant to control demand and supply. It is true that US has stable economy. Assessment of the Australian equilibrium economy Australian has stable economic equilibrium. The economy of Australian is growing at alarming trend rate while the real nominal economy is also adjusting after some years of weakness. The actual growth in Australian demand (The total household formation rates and population growth) increases supply of the commodity which in turn lower price, irrespective of the rules concerning tax ( Menzel, 2015). Australia also has a rapid increase in demand for most of its products, therefore this motivate it to increase the actual quantity of goods supplied to foreign countries. The equilibrium price of the commodity is being calculated taking into consideration both the quantity demanded and the quantity supplied by the country (Menzel, 2015). The Australian Exports keep on changing due to changes in product price. This suggests that as the demand increases, the supply of their products also increases leading to a change in the price of their commodities. Australia is again assumed as a small open economy and their export prices are arrived at by world prices (Martin Sunley, 2015). This reveals that the Australian product export is extremely elastic. The supply and demand curve are approximated for a given commodity export. Assessment of the Chinese equilibrium economy Chinese economys shows a fall in economic growth. Chinas fiscal policy The government of china developed strong fiscal reforms and monetary policy to help cap problems of unemployment of faced by large population. Monetary policy ensures price stability, controlling exchange rate and then encouraging economic growth. China huge demand for raw material made global product prices up. China export changes in the past few years. Their actual demand and supply keep on changing and this prove that it has stable economy. Conclusion The paper has analyses the type of the equilibrium economy in a particular country is being determined by the forces of demand and supply taking price into consideration. Most of the developed countries apply has a stable equilibrium economy. This is because when market has a high demand for a particular product there will be a rapid increase in supply at a given price. Reference Adachi, H. (2017). Stable matchings and fixed points in trading networks: A note.Economics Letters,156, 65-67. Ikeda, K., Murota, K., Takayama, Y. (2017). Stable economic agglomeration patterns in two dimensions: Beyond the scope of central place theory.Journal of Regional Science,57(1), 132-172. Kirman, A. (2017). The economy as a complex system. InEconomic Foundations for Social Complexity Science(pp. 1-16). Springer, Singapore. cccTemporary monetary equilibrium theory: a differentiable approach. Routledge. Martin, R., Sunley, P. (2015). On the notion of regional economic resilience: conceptualization and explanation.Journal of Economic Geography,15(1), 1-42. Menzel, K. (2015). Large Matching Markets as Two?Sided Demand Systems.Econometrica,83(3), 897-941. Wu, H., Zhang, D., Chen, B., Yang, M. (2018). Allocation of emission permits based on DEA and production stability.INFOR: Information Systems and Operational Research,56(1), 82-91. Zolotas, X. E. (2015).Monetary equilibrium and economic development. Princeton University Press.