The Dynamics of a Network of Demand Servos

Abstract

The maintenance of output-equilibrium by a set of economic systems, or the adaptation of supply to demand, is a subject extensively discussed in economics. To a first approximation, classical theory is not interested in the dynamics of such a process, but in equilibrium states. Because supply is an increasing function of price and demand a decreasing function, price variations and the resulting entering and leaving of the market by customers and suppliers cause equilibrium: if supply exceeds demand, the price goes down, some suppliers leave and some customers enter until equilibrium is reached. If supply is too low, the reverse happens.