The purpose of this paper is to formulate how an economy adjusts itself if it is not in equilibrium, and to examine whether such adjustment will tend to bring the economy to equilibrium. Since we require the (decentralised) economy to adjust itself, this must be through the independent optimising behaviour of the individual agents in the economy, rather than through some deus ex machina, such as an ‘auctioneer’. To do this it is useful to reinterpret the concept of an equilibrium: as a state from which there is no movement. This immediately identifies the natural movement property of the economy; it is the stability of this which we examine.
KeywordsDemand Function Demand Curve Excess Demand Price Adjustment Price Vector
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