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Market Failure and Government Intervention

Figure 17-6a.  Stability

In the diagram at left, referred to as the “fixed point damped” case of stability, the return to equilibrium comes either from above or below the equilibrium.  But in the case at right, referred to as the “oscillatory damped” case of stability, the approach to equilibrium alternates from above and below, with the distance from the equilibrium becoming smaller and smaller.

Sometimes a process never approaches a specific equilibrium  but seems to wander between more than one equilibrium level as pictured in Figure 17-6b.

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