State marshallian and walrasian stability condition of market equilibrium.Do you think that existence of Marshallian stability necessarily ensures walrasian stability and vice versa? Explain.

Equilibrium is said to exist in a market when forces of demand balance forces of supply.

Consider the figure  to understand the Walrasian adjustment mechanism. To begin with the market is in equilibrium with demand curve D and supply curve S and market prices at P^*. For prices greater than P^* such as P₁, supply exceeds demand leading to creation of excess supply and a downward pressure on prices pushing the prices back to P^*. Similarly at prices lower than P^* demand is greater than supply leading to excess demand and an upward pressure on prices pushing the prices back to P^*.

Thus the Walrasian adjustment process in case of normal demand and supply conditions will ensure stability.

Consider the above figure to understand the Marshallian adjustment mechanism. To begin with the market is in equilibrium with demand curve D and supply curve S and market prices at P^*. For quantities less than Q^* such as Q₁, demand price is greater than supply price, encouraging firms to expand output pushing the equilibrium quantity back to Q^*. Similarly at quantities greater Q^* demand price is smaller than supply price pushing firms to cut down outputs and getting the market clearing output back to Q^*.