Unstable Disequilibrium: Divergence from Equilibrium After Shock

Steps:

• Locate the two equilibrium points where supply equals demand curves intersect.
• Analyze stability: at stable equilibrium, market forces return to it after a shock; at unstable, forces push further away.
• Examine disequilibrium positions near each equilibrium to see market response direction.
• Identify the price where excess supply or demand amplifies deviation, indicating instability.

Why A is correct:

• Price A is unstable because a shock creates excess supply that drives prices down further, diverging from equilibrium per market adjustment laws.

Why the others are wrong:

• B: Stable equilibrium; shocks lead back via corrective shortages or surpluses.
• C: Not an equilibrium; it's a disequilibrium but returns toward stable point.
• D: Stable equilibrium; market converges after perturbation.

Final answer: A