Posts Tagged ‘Point of Recognizable Limit’

In recognizing a person there are certain features of the person that is peculiar to the person. Gait recognition is as unique as his voice. A person’s finger print or blood group adds to his individual characteristic. Visual clues we rely for such recognition one may say is basic for a appreciating caricature. In the pre War days cartoonists had a field day using tooth brush moustache, an umbrella or a cigar that gave the reader a clue to the identity. Toothbrush moustache was the trademark of Hitler as an umbralla characterized Chamberlain. Churchill’s cigar and his baby face were as easily identifiable as the profile of Hitchcock was later.

A face may be drawn and many details of it may be left out and still one may recognize it. Suppose one goes on removing features there comes a point the face is no longer identifiable. This point where such a change occures is Point of Recognizable Limit PRL

Let us apply the same principle to economics. Equilibrium is the word.

The term equilibrium is used to suggest a state of “balance” between supply forces and demand forces. For example, an increase in supply will disrupt the equilibrium, leading to lower prices. Eventually, a new equilibrium will be attained in most markets. Then, there will be no change in price or the amount of output bought and sold — until there is an exogenous(1) shift in supply or demand.

Not all economic equilibria are stable. if a movement out of supply/demand equilibrium leads to an excess supply (glut) that induces price declines till the quantity demanded equals the quantity supplied.

(1)Exogeny:a change in consumer tastes or preferences works from outside. Dress from animal skins, fur for example alligator shoes may go out of fashion since people are conscious of conservation, ethical living.Naturally it shall lead also changes within(endogenous) till equilibrium price is arrived.


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