The world is dynamic.The change in time leads to the change in price which brings changes in demand and supply of the commodity.This leads to the changes in equilibrium.Micro dynamics,thus,refers to a position by which the system passes from one position of equilibrium to other.It throws full light on the happening in the transition from one equilibrium to another.It is the fullest study between disturbances in one equilibrium and equilibrium of another.This method involves a full length movie of entire sequence.
According to J.N.Schumpeter"We call relation dynamic if it connects economic quantities that differ to different points of time."The dynamics relationship can be made clear by the help of an example.If the demand for the commodity at a the time period.Is the function of the price expected in latter period of time.The relationship between demand and price is a dynamic relation.The dynamic functional relationship can be shown in an equation.
When the demand curve and is the supply curve is the original point of equilibrium.Here is the equilibrium price and is the equilibrium quantity.
Suppose that demand increase to since supply does not increase supply with demand.The firms increase supply by working more.As a result of the supply condition becomes after some time.Due to the increase in supply,the price falls by. Still the price is lighter than.So the firms increase supply.The supply curve is now.This process is continued until the falls to is the price that gives normal price.
According to J.N.Schumpeter"We call relation dynamic if it connects economic quantities that differ to different points of time."The dynamics relationship can be made clear by the help of an example.If the demand for the commodity at a the time period.Is the function of the price expected in latter period of time.The relationship between demand and price is a dynamic relation.The dynamic functional relationship can be shown in an equation.
When the demand curve and is the supply curve is the original point of equilibrium.Here is the equilibrium price and is the equilibrium quantity.
Suppose that demand increase to since supply does not increase supply with demand.The firms increase supply by working more.As a result of the supply condition becomes after some time.Due to the increase in supply,the price falls by. Still the price is lighter than.So the firms increase supply.The supply curve is now.This process is continued until the falls to is the price that gives normal price.
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