document_title: Odometer

question_text: when did they start putting odometers in cars

text: Odometer

text: History[edit]

text: Classical Era[edit]

text: Possibly the first evidence for the use of an odometer can be found in the works of the ancient Roman Pliny (NH 6. 61-62) and the ancient Greek Strabo (11.8.9). Both authors list the distances of routes traveled by Alexander the Great (r. 336-323 BC) as by his bematists Diognetus and Baeton. However, the high accuracy of the bematists's measurements rather indicates the use of a mechanical device. For example, the section between the cities Hecatompylos and Alexandria Areion, which later became a part of the silk road, was given by Alexander's bematists as 529 English miles long, that is with a deviation of 0.2% from the actual distance (531 English miles). From the nine surviving bematists' measurements in Pliny's Naturalis Historia eight show a deviation of less than 5% from the actual distance, three of them being within 1%. Since these minor discrepancies can be adequately explained by slight changes in the tracks of roads during the last 2300 years, the overall accuracy of the measurements implies that the bematists already must have used a sophisticated device for measuring distances, although there is no direct mention of such a device.

text: An odometer for measuring distance was first described by Vitruvius around 27 and 23 BC, although the actual inventor may have been Archimedes of Syracuse (c. 287 BC – c. 212 BC) during the First Punic War. Hero of Alexandria (10 AD - 70 AD) describes a similar device in chapter 34 of his Dioptra. The machine was also used in the time of Roman Emperor Commodus (c. 192 AD), although after this point in time there seems to be a gap between its use in Roman times and that of the 15th century in Western Europe.[3] Some researchers have speculated that the device might have included technology similar to that of the Greek Antikythera mechanism.[4]

text: The odometer of Vitruvius was based on chariot wheels of 4 feet (1.2 m) diameter turning 400 times in one Roman mile (about 1400 m). For each revolution a pin on the axle engaged a 400 tooth cogwheel thus turning it one complete revolution per mile. This engaged another gear with holes along the circumference, where pebbles (calculus) were located, that were to drop one by one into a box. The distance traveled would thus be given simply by counting the number of pebbles.[4] Whether this instrument was ever built at the time is disputed. Leonardo da Vinci later tried to build it himself according to the description, but failed. However, in 1981 engineer Andre Sleeswyk built his own replica, replacing the square-toothed gear designs of da Vinci with the triangular, pointed teeth found in the Antikythera mechanism. With this modification, the Vitruvius odometer functioned perfectly.[4]

text: Imperial China[edit]

text: Han Dynasty and Three Kingdoms period[edit]

text: The odometer was also independently invented in ancient China, possibly by the prolific inventor and early scientist Zhang Heng (78 AD – 139 AD) of the Han Dynasty. By the 3rd century (during the Three Kingdoms Period), the Chinese had termed the device as the 'jì lĭ gŭ chē' (記里鼓車), or 'li-recording drum carriage' (Note: the modern measurement of li = 500 m/1640 ft).[5] Chinese texts of the 3rd century tell of the mechanical carriage's functions, and as one li is traversed, a mechanical-driven wooden figure strikes a drum, and when ten li is traversed, another wooden figure would strike a gong or a bell with its mechanical-operated arm.[5]

text: Despite its association with Zhang Heng or even the later Ma Jun (c. 200–265), there is evidence to suggest that the invention of the odometer was a gradual process in Han Dynasty China that centered around the huang men court people (i.e. eunuchs, palace officials, attendants and familiars, actors, acrobats, etc.) that would follow the musical procession of the royal 'drum-chariot'.[6] The historian Joseph Needham asserts that it is no surprise this social group would have been responsible for such a device, since there is already other evidence of their craftsmenship with mechanical toys to delight the emperor and the court. There is speculation that some time in the 1st century BC (during the Western Han Dynasty), the beating of drums and gongs were mechanically-driven by working automatically off the rotation of the road-wheels.[6] This might have actually been the design of one Loxia Hong (c. 110 BC), yet by 125 AD the mechanical odometer carriage in China was already known (depicted in a mural of the Xiaotangshan Tomb).[6]

text: The odometer was used also in subsequent periods of Chinese history. In the historical text of the Jin Shu (635 AD), the oldest part of the compiled text, the book known as the Cui Bao (c. 300 AD), recorded the use of the odometer, providing description (and interestingly enough attributing it to the Western Han era, from 202 BC–9 AD).[7] The passage in the Jin Shu expanded upon this, explaining that it took a similar form to the mechanical device of the south-pointing chariot invented by Ma Jun (200–265, see also differential gear). As recorded in the Song Shi of the Song Dynasty (960-1279 AD), the odometer and south-pointing chariot were combined into one wheeled device by engineers of the 9th century, 11th century, and 12th century. The Sunzi Suanjing (Master Sun's Mathematical Manual), dated from the 3rd century to 5th century, presented a mathematical problem for students involving the odometer. It involved a given distance between two cities, the small distance needed for one rotation of the carriage's wheel, and the posed question of how many rotations the wheels would have in all if the carriage was to travel between point A and B.[7]

text: Song Dynasty[edit]

text: The historical text of the Song Shi (1345 AD), recording the people and events of the Chinese Song Dynasty (960–1279), also mentioned the odometer used in that period. However, unlike written sources of earlier periods, it provided a much more thoroughly detailed description of the device that harkens back to its ancient form (Wade-Giles spelling):

text: The odometer. [The mile-measuring carriage] is painted red, with pictures of flowers and birds on the four sides, and constructed in two storeys, handsomely adorned with carvings. At the completion of every li, the wooden figure of a man in the lower storey strikes a drum; at the completion of every ten li, the wooden figure in the upper storey strikes a bell. The carriage-pole ends in a phoenix-head, and the carriage is drawn by four horses. The escort was formerly of 18 men, but in the 4th year of the Yung-Hsi reign-period (987 AD) the emperor Thai Tsung increased it to 30. In the 5th year of the Thien-Sheng reign-period (1027 AD) the Chief Chamberlain Lu Tao-lung presented specifications for the construction of odometers as follows:[6]

text: What follows is a long dissertation made by the Chief Chamberlain Lu Daolong on the ranging measurements and sizes of wheels and gears, along with a concluding description at the end of how the device ultimately functions:

text: The vehicle should have a single pole and two wheels. On the body are two storeys, each containing a carved wooden figure holding a drumstick. The road-wheels are each 6 ft in diameter, and 18 ft in circumference, one evolution covering 3 paces. According to ancient standards the pace was equal to 6 ft and 300 paces to a li; but now the li is reckoned as 360 paces of 5 ft each.[6]

text: [Note: the measurement of the Chinese-mile unit, the li, was changed over time, as the li in Song times differed from the length of a li in Han times.]

text: The vehicle wheel (li lun) is attached to the left road-wheel; it has a diameter of 1.38 ft with a circumference of 4.14 ft, and has 18 cogs (chhih) 2.3 inches apart. There is also a lower horizontal wheel (hsia phing lun), of diameter 4.14 ft and circumference 12.42 ft, with 54 cogs, the same distance apart as those on the vertical wheel (2.3 inches). (This engages with the former.) [6]

text: Upon a vertical shaft turning with this wheel, there is fixed a bronze "turning-like-the-wind wheel" (hsuan feng lun) which has (only) 3 cogs, the distance between these being 1.2 inches. (This turns the following one.) In the middle is a horizontal wheel, 4 ft in diameter, and 12 ft circumference, with 100 cogs, the distance between these cogs being the same as on the "turning-like-the-wind wheel" (1.2 inches).[8]

text: Next, there is fixed (on the same shaft) a small horizontal wheel (hsiao phing lun) 3.3 inches in diameter and 1 ft in circumference, having 10 cogs 1.5 inches apart. (Engaging with this) there is an upper horizontal wheel (shang phing lun) having a diameter of 3.3 ft and a circumference of 10 ft, with 100 cogs, the same distance apart as those of the small horizontal wheel (1.5 inches).[8]

text: When the middle horizontal wheel has made 1 revolution, the carriage will have gone 1 li and the wooden figure in the lower story will strike the drum. When the upper horizontal wheel has made 1 revolution, the carriage will have gone 10 li and the figure in the upper storey will strike the bell. The number of wheels used, great and small, is 8 inches in all, with a total of 285 teeth. Thus the motion is transmitted as if by the links of a chain, the "dog-teeth" mutually engaging with each other, so that by due revolution everything comes back to its original starting point (ti hsiang kou so, chhuan ya hsiang chih, chou erh fu shih).[8]

text: Subsequent developments[edit]

text: Odometers were first developed in the 1600s for wagons and other horse-drawn vehicles in order to measure distances traveled.

text: Levin Hulsius published the odometer in 1604 in his work Gründtliche Beschreibung deß Diensthafften und Nutzbahrn Instruments Viatorii oder Wegzählers, So zu Fuß, zu Pferdt unnd zu Fußen gebraucht werden kann, damit mit geringer mühe zu wissen, wie weit man gegangen, geritten, oder gefahren sey: als auch zu erfahren, ohne messen oder zehlen, wie weit von einem Orth zum andern. Daneben wird auch der grosse verborgene Wegweiser angezeiget und vermeldet.[9]

text: In 1645, the French mathematician Blaise Pascal invented the pascaline. Though not an odometer, the pascaline utilized gears to compute measurements. Each gear contained 10 teeth. The first gear advanced the next gear one position when moved one complete revolution, the same principle employed on modern mechanical odometers.

text: Odometers were developed for ships in 1698 with the odometer invented by the Englishman Thomas Savery. Benjamin Franklin, U.S. statesman and the first Postmaster General, built a prototype odometer in 1775 that he attached to his carriage to help measure the mileage of postal routes.[10] In 1847, William Clayton, a Mormon pioneer, invented the Roadometer, which he attached to a wagon used by American settlers heading west.[11] The Roadometer recorded the distance traveled each day by the wagon trains. The Roadometer used two gears and was an early example of an odometer with pascaline-style gears in actual use.

text: In 1895, Curtis Hussey Veeder invented the Cyclometer.[12][13] The Cyclometer was a mechanical device that counted the number of rotations of a bicycle wheel.[14] A flexible cable transmitted the number of rotations of the wheel to an analog odometer visible to the rider, which converted the wheel rotations into the number of miles traveled according to a predetermined formula.

text: In 1903 Arthur P. and Charles H. Warner, two brothers from Beloit, Wisconsin, introduced their patented Auto-meter. The Auto-Meter used a magnet attached to a rotating shaft to induce a magnetic pull upon a thin metal disk. Measuring this pull provided accurate measurements of both distance and speed information to automobile drivers in a single instrument. The Warners sold their company in 1912 to the Stewart & Clark Company of Chicago. The new firm was renamed the Stewart-Warner Corporation. By 1925, Stewart-Warner odometers and trip meters were standard equipment on the vast majority of automobiles and motorcycles manufactured in the United States.

text: By the early 2000s, mechanical odometers would be phased out on cars from major manufacturers. The Pontiac Grand Prix was the last GM car sold in the USA to offer a mechanical odometer in 2003, the Canadian-built Ford Crown Victoria and Mercury Grand Marquis were the very last Fords sold with one in 2005.[citation needed]

text: Whilst an odometer is used to record distance (units can vary, usually between miles and kilometres), a mileometer specifically records only in miles. The equivalent used to record kilometres is sometimes referred to as a "kilometreometer".

text: Trip meters[edit]

text: Most modern cars include a trip meter (trip odometer). Unlike the odometer, a trip meter is reset at any point in a journey, making it possible to record the distance traveled in any particular journey or part of a journey. It was traditionally a purely mechanical device but, in most modern vehicles, it is now electronic. Luxury vehicles often have multiple trip meters. Most trip meters will show a maximum value of 999.9. The trip meter may be used to record the distance traveled on each tank of fuel, making it very easy to accurately track the energy efficiency of the vehicle; another common use is resetting it to zero at each instruction in a sequence of driving directions, to be sure when one has arrived at the next turn.

text: Clocking/busting miles and legality[edit]

text: A form of fraud is to tamper with the reading on an mileometer/odometer and presenting the incorrect number of miles/kilometers traveled to a prospective buyer; this is often referred to as "clocking" in the UK and "Busting miles" in the US. This is done to make a car appear to have been driven less than it really has been, and thus increase its apparent market value. Most [16] new cars sold today use digital odometers that store the mileage in the vehicle's engine control module making it difficult (but not impossible) to manipulate the mileage electronically. With mechanical odometers, the speedometer can be removed from the car dashboard and the digits wound back, or the drive cable can be disconnected and connected to another odometer/speedometer pair while on the road. Older vehicles can be driven in reverse to subtract mileage, a property that provides the premise for a classic scene late in the comedy film Ferris Bueller's Day Off, but modern odometers add mileage driven in reverse to the total as if driven forward, thereby accurately reflecting the true total wear and tear on the vehicle.

text: The resale value of a vehicle is often strongly influenced by the total distance shown on the odometer, yet odometers are inherently insecure because they are under the control of their owners. Many jurisdictions have chosen to enact laws which penalize people who are found to commit odometer fraud. In the US (and many other countries), vehicle mechanics are also required to keep records of the odometer any time a vehicle is serviced. Companies such as Carfax then use these data to help potential car buyers detect whether odometer rollback has occurred.

text: Prevalence[edit]

text: Research by Irish vehicle check specialist Cartell found that 20% of vehicles imported to Ireland from Great Britain and Northern Ireland had had their mileometers altered to show a lower mileage.[17]

text: Accuracy[edit]

text: Most odometers work by counting wheel rotations and assume that the distance traveled is the number of wheel rotations times the tire circumference, which is a standard tire diameter times pi (3.1416). If nonstandard or severely worn or underinflated tires are used then this will cause some error in the odometer. The formula is (actual distance traveled) = ( (final odometer reading) - (initial odometer reading) ) * (actual tire diameter) / (standard tire diameter). It is common for odometers to be off by several percent.[citation needed] Odometer errors are typically proportional to speedometer errors.


document_title: Economic equilibrium

question_text: when would a system not return to the original equilibrium but establish a new one

root

text: Economic equilibrium

text: Properties of equilibrium[edit]

text: Three basic properties of equilibrium in general have been proposed by Huw Dixon.[2] These are:

tag: p

text: Equilibrium property P1: The behavior of agents is consistent.

text: Equilibrium property P2: No agent has an incentive to change its behavior.

text: Equilibrium Property P3: Equilibrium is the outcome of some dynamic process (stability).

text: Example: The competitive equilibrium[edit]

text:
P – price
Q – quantity demanded and supplied
S – supply curve
D – demand curve
P0 – equilibrium price
A – excess demand – when P<P0
B – excess supply – when P>P0

tag: ul

text: In a competitive equilibrium, supply equals demand. Property P1 is satisfied, because at the equilibrium price the amount supplied is equal to the amount demanded. Property P2 is also satisfied. Demand is chosen to maximize utility given the market price: no one on the demand side has any incentive to demand more or less at the prevailing price. Likewise supply is determined by firms maximizing their profits at the market price: no firm will want to supply any more or less at the equilibrium price. Hence, agents on neither the demand side nor the supply side will have any incentive to alter their actions.

text: To see whether Property P3 is satisfied, consider what happens when the price is above the equilibrium. In this case there is an excess supply, with the quantity supplied exceeding that demanded. This will tend to put downward pressure on the price to make it return to equilibrium. Likewise where the price is below the equilibrium point there is a shortage in supply leading to an increase in prices back to equilibrium. Not all equilibria are "stable" in the sense of Equilibrium property P3. It is possible to have competitive equilibria that are unstable. However, if an equilibrium is unstable, it raises the question of how you might get there. Even if it satisfies properties P1 and P2, the absence of P3 means that the market can only be in the unstable equilibrium if it starts off there.

text: In most simple microeconomic stories of supply and demand a static equilibrium is observed in a market; however, economic equilibrium can be also dynamic. Equilibrium may also be economy-wide or general, as opposed to the partial equilibrium of a single market. Equilibrium can change if there is a change in demand or supply conditions. 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 shift in supply or demand (such as changes in technology or tastes). That is, there are no endogenous forces leading to the price or the quantity.

text: Example: Nash equilibrium[edit]

text: The Nash equilibrium is widely used in economics as the main alternative to competitive equilibrium. It is used whenever there is a strategic element to the behavior of agents and the "price taking" assumption of competitive equilibrium is inappropriate. The first use of the Nash equilibrium was in the Cournot duopoly as developed by Antoine Augustin Cournot in his 1838 book.[3] Both firms produce a homogenous product: given the total amount supplied by the two firms, the (single) industry price is determined using the demand curve. This determines the revenues of each firm (the industry price times the quantity supplied by the firm). The profit of each firm is then this revenue minus the cost of producing the output. Clearly, there is a strategic interdependence between the two firms. If one firm varies its output, this will in turn affect the market price and so the revenue and profits of the other firm. We can define the payoff function which gives the profit of each firm as a function of the two outputs chosen by the firms. Cournot assumed that each firm chooses its own output to maximize its profits given the output of the other firm. The Nash equilibrium occurs when both firms are producing the outputs which maximize their own profit given the output of the other firm.

text: In terms of the equilibrium properties, we can see that P2 is satisfied: in a Nash equilibrium, neither firm has an incentive to deviate from the Nash equilibrium given the output of the other firm. P1 is satisfied since the payoff function ensures that the market price is consistent with the outputs supplied and that each firms profits equal revenue minus cost at this output.

text: Is the equilibrium stable as required by P3? Cournot himself argued that it was stable using the stability concept implied by best response dynamics. The reaction function for each firm gives the output which maximizes profits (best response) in terms of output for a firm in terms of a given output of the other firm. In the standard Cournot model this is downward sloping: if the other firm produces a higher output, your best response involves producing less. Best response dynamics involves firms starting from some arbitrary position and then adjusting output to their best-response to the previous output of the other firm. So long as the reaction functions have a slope of less than -1, this will converge to the Nash equilibrium. However, this stability story is open to much criticism. As Dixon argues: "The crucial weakness is that, at each step, the firms behave myopically: they choose their output to maximize their current profits given the output of the other firm, but ignore the fact that the process specifies that the other firm will adjust its output...".[4] There are other concepts of stability that have been put forward for the Nash equilibrium, evolutionary stability for example.

text: Normative evaluation[edit]

text: Most economists e.g., Paul Samuelson[5]:Ch.3,p.52 caution against attaching a normative meaning (value judgement) to the equilibrium price. For example, food markets may be in equilibrium at the same time that people are starving (because they cannot afford to pay the high equilibrium price). Indeed, this occurred during the Great Famine in Ireland in 1845–52, where food was exported though people were starving, due to the greater profits in selling to the English – the equilibrium price of the Irish-British market for potatoes was above the price that Irish farmers could afford, and thus (among other reasons) they starved.[6]

text: Interpretations[edit]

text: In most interpretations, classical economists such as Adam Smith maintained that the free market would tend towards economic equilibrium through the price mechanism. That is, any excess supply (market surplus or glut) would lead to price cuts, which decrease the quantity supplied (by reducing the incentive to produce and sell the product) and increase the quantity demanded (by offering consumers bargains), automatically abolishing the glut. Similarly, in an unfettered market, any excess demand (or shortage) would lead to price increases, reducing the quantity demanded (as customers are priced out of the market) and increasing in the quantity supplied (as the incentive to produce and sell a product rises). As before, the disequilibrium (here, the shortage) disappears. This automatic abolition of non-market-clearing situations distinguishes markets from central planning schemes, which often have a difficult time getting prices right and suffer from persistent shortages of goods and services.[7]

text: This view came under attack from at least two viewpoints. Modern mainstream economics points to cases where equilibrium does not correspond to market clearing (but instead to unemployment), as with the efficiency wage hypothesis in labor economics. In some ways parallel is the phenomenon of credit rationing, in which banks hold interest rates low to create an excess demand for loans, so they can pick and choose whom to lend to. Further, economic equilibrium can correspond with monopoly, where the monopolistic firm maintains an artificial shortage to prop up prices and to maximize profits. Finally, Keynesian macroeconomics points to underemployment equilibrium, where a surplus of labor (i.e., cyclical unemployment) co-exists for a long time with a shortage of aggregate demand.

text: Solving for the competitive equilibrium price[edit]

text: To solve for the equilibrium price, one must either plot the supply and demand curves, or solve for their equations being equal.

text: An example may be:

text: In the diagram, depicting simple set of supply and demand curves, the quantity demanded and supplied at price P are equal.

text: At any price above P supply exceeds demand, while at a price below P the quantity demanded exceeds that supplied. In other words, prices where demand and supply are out of balance are termed points of disequilibrium, creating shortages and oversupply. Changes in the conditions of demand or supply will shift the demand or supply curves. This will cause changes in the equilibrium price and quantity in the market.

text: Consider the following demand and supply schedule:

text:
Price ($)
Demand
Supply

8.00
6,000
18,000

7.00
8,000
16,000

6.00
10,000
14,000

5.00
12,000
12,000

4.00
14,000
10,000

3.00
16,000
8,000

2.00
18,000
6,000

1.00
20,000
4,000

tag: table

text:
The equilibrium price in the market is $5.00 where demand and supply are equal at 12,000 units
If the current market price was $3.00 – there would be excess demand for 8,000 units, creating a shortage.
If the current market price was $8.00 – there would be excess supply of 12,000 units.

text: When there is a shortage in the market we see that, to correct this disequilibrium, the price of the good will be increased back to a price of $5.00, thus lessening the quantity demanded and increasing the quantity supplied thus that the market is in balance.

text: When there is an oversupply of a good, such as when price is above $6.00, then we see that producers will decrease the price to increase the quantity demanded for the good, thus eliminating the excess and taking the market back to equilibrium.

text: Influences changing price[edit]

text: A change in equilibrium price may occur through a change in either the supply or demand schedules. For instance, starting from the above supply-demand configuration, an increased level of disposable income may produce a new demand schedule, such as the following:

text:
Price ($)
Demand
Supply

8.00
10,000
18,000

7.00
12,000
16,000

6.00
14,000
14,000

5.00
16,000
12,000

4.00
18,000
10,000

3.00
20,000
8,000

2.00
22,000
6,000

1.00
24,000
4,000

text: Here we see that an increase in disposable income would increase the quantity demanded of the good by 2,000 units at each price. This increase in demand would have the effect of shifting the demand curve rightward. The result is a change in the price at which quantity supplied equals quantity demanded. In this case we see that the two now equal each other at an increased price of $6.00. Note that a decrease in disposable income would have the exact opposite effect on the market equilibrium.

text: We will also see similar behaviour in price when there is a change in the supply schedule, occurring through technological changes, or through changes in business costs. An increase in technological usage or know-how or a decrease in costs would have the effect of increasing the quantity supplied at each price, thus reducing the equilibrium price. On the other hand, a decrease in technology or increase in business costs will decrease the quantity supplied at each price, thus increasing equilibrium price.

text: The process of comparing two static equilibria to each other, as in the above example, is known as comparative statics. For example, since a rise in consumers' income leads to a higher price (and a decline in consumers' income leads to a fall in the price — in each case the two things change in the same direction), we say that the comparative static effect of consumer income on the price is positive. This is another way of saying that the total derivative of price with respect to consumer income is greater than zero.

text: Dynamic equilibrium[edit]

text: Whereas in a static equilibrium all quantities have unchanging values, in a dynamic equilibrium various quantities may all be growing at the same rate, leaving their ratios unchanging. For example, in the neoclassical growth model, the working population is growing at a rate which is exogenous (determined outside the model, by non-economic forces). In dynamic equilibrium, output and the physical capital stock also grow at that same rate, with output per worker and the capital stock per worker unchanging. Similarly, in models of inflation a dynamic equilibrium would involve the price level, the nominal money supply, nominal wage rates, and all other nominal values growing at a single common rate, while all real values are unchanging, as is the inflation rate.[8]

text: The process of comparing two dynamic equilibria to each other is known as comparative dynamics. For example, in the neoclassical growth model, starting from one dynamic equilibrium based in part on one particular saving rate, a permanent increase in the saving rate leads to a new dynamic equilibrium in which there are permanently higher capital per worker and productivity per worker, but an unchanged growth rate of output; so it is said that in this model the comparative dynamic effect of the saving rate on capital per worker is positive but the comparative dynamic effect of the saving rate on the output growth rate is zero.

text: Disequilibrium[edit]

text: Disequilibrium characterizes a market that is not in equilibrium.[9] Disequilibrium can occur extremely briefly or over an extended period of time. Typically in financial markets it either never occurs or only momentarily occurs, because trading takes place continuously and the prices of financial assets can adjust instantaneously with each trade to equilibrate supply and demand. At the other extreme, many economists view labor markets as being in a state of disequilibrium—specifically one of excess supply—over extended periods of time. Goods markets are somewhere in between: prices of some goods, while sluggish in adjusting due to menu costs, long term contracts, and other impediments, do not stay at disequilibrium levels indefinitely, and many goods markets such as commodity markets are highly organised and liquid and have essentially instantaneous adjustment of their prices to equilibrium levels.

text: Credit markets[edit]

text: Disequilibrium credit rationing can occur for one of two reasons. In the presence of usury laws, if the equilibrium interest rate on loans is above the legally allowable rate, the market cannot clear and at the maximum allowable rate the quantity of credit demanded will exceed the quantity of credit supplied.

text: A more subtle source of credit rationing is that higher interest rates can increase the risk of default by the borrower, making the potential lender reluctant to lend at otherwise attractively high interest rates.

text: Labour markets[edit]

text: Labour markets are prone to particular sources of price rigidity because the item being transacted is people, and laws or social constraints designed to protect those people may hinder market adjustments. Such constraints include restrictions on who or how many people can be laid off and when (which can affect both the number of layoffs and the number of people hired by firms that are concerned by the restrictions), restrictions on the lowering of wages when a firm experiences a decline in the demand for its product, and long-term labor contracts that pre-specify wages.

text: Spillovers between markets[edit]

text: Disequilibrium in one market can affect demand or supply in other markets. Specifically, if an economic agent is constrained in one market, his supply or demand in another market may be changed from its unconstrained form, termed the notional demand, into a modified form known as effective demand. If this occurs systematically for a large number of market participants, market outcomes in the latter market for prices and quantities transacted (themselves either equilibrium or disequilibrium outcomes) will be affected.

text: Examples include:

text:
If the supply of mortgage credit to potential homebuyers is rationed, this will decrease the demand for newly built houses.
If labourers cannot supply all the labor they wish to, they will have constrained income and their demand in the goods market will be lower.
If employers cannot hire all the labor they wish to, they cannot produce as much output as they wish to, and supply in the market for their good will be diminished.