2. Does equilibrium really exist? Research about Vernon Smith’s experiment. Discuss in depth what he did and did it prove the existance of equilibrium or not

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2. Does equilibrium really exist? Research about Vernon Smith’s experiment. Discuss in depth what he did and did it prove the existance of equilibrium or not.
Economic forces like supply and demand are balanced in an equilibrium situation, and the values of economic variables will remain unchanged in the absence of outside influences. This is known as economic equilibrium in the field of economics. Equilibrium arises, for instance, when the quantity supplied and demanded are equal in the standard textbook perfect competition.
In this context, market equilibrium refers to the state in which sellers and buyers produce an equal quantity of goods and services at a price determined by market competition. This price, which is also known as the "competitive quantity" or "market clearing quantity," is frequently referred to as the competitive price or the market clearing price. It typically doesn't fluctuate unless there are changes in supply or demand. However, the economics notion of equilibrium also holds true in imperfectly competitive markets, where it manifests as a Nash equilibrium.
When there is no way for the economic agent to alter the situation through strategy, the situation is said to be in an economic equilibrium. The physical sciences are where the idea originated. Consider a system in which the forces of nature are balanced.This, when understood economically, indicates that nothing more changes.
In general, three fundamental properties of equilibrium have been proposed by Hugh Dixon. They are as follows:
• The consistent behavior of the agents is the equilibrium property P1.
• P2: The equilibrium property: No agent has a reason to behave differently.
• Property P3 of equilibrium: Stability is the result of a dynamic process that leads to equilibrium.
In a competitive equilibrium, supply and demand are equalized by price.
P stands for price; Q for quantity supplied and demanded; S for supply curve; and D for demand curve
Equilibrium price, or P0
When P
P0, there is excess supply (B).

Supply and demand are equal in a competitive equilibrium. Because the amount demanded and supplied at the equilibrium price are equal, Property P1 is satisfied. P2 is likewise fulfilled. Since no one on the demand side has any incentive to demand more or less at the going rate, demand is chosen to maximize utility given the market price. Similar to demand, supply is set by businesses seeking to maximize their profits at the market price; at the equilibrium price, no business will desire to supply more or less. As a result, neither the demand side nor the supply side of the market will have any motivation to change their behavior.

Look at what happens when the price is above the equilibrium to determine whether Property P3 is satisfied. As the amount supplied exceeds the quantity demanded, there is an excess supply in this instance. To bring the price back to balance, this will typically exert downward pressure on it. Similar shortages in supply cause prices to rise to equilibrium when they are below the equilibrium point. In reference to equilibrium property P3, not every equilibrium is "stable". Instable competitive equilibria are not unattainable. But reaching an equilibrium becomes problematic if it is unstable. The lack of P3 implies that the market can only be in the unstable equilibrium if it begins there, even if it satisfies properties P1 and P2.
Although a market's equilibrium can be static in the majority of straightforward microeconomic tales involving supply and demand, it can also be dynamic. Unlike the partial equilibrium of a single market, equilibrium can also be economy-wide or general. In the event that supply or demand conditions alter, equilibrium may shift. Lower prices can result from an imbalance caused by an increase in supply, for instance. It is inevitable for most markets to reach a new equilibrium. Unless there is an exogenous shift in supply or demand (like changes in technology or tastes), there won't be any changes in the price or the quantity of output traded. In other words, neither quantity nor price are the result of endogenous forces.
Economics was once thought to be a fairly complex science because it studied natural processes that could not be verified through lab testing. But over time, it became evident that the evaluation of theories based solely on historical data is insufficient to account for the current state of the economy. With the aid of a fictitious experiment, the proposed theories were gradually investigated, establishing all the prerequisites for the testing of a specific hypothesis. This is the origin of experimental economics.

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