Does unstable market equilibrium exist in real life? In Reading 13, exhibit 10, panel B. Both demand and supply is negatively sloped, demand is steeper, if the price is above the equilibrium price, there will be excess demand, causing the price to move further away from the equilibrium price. Does this actually exist in real life or just another hypothetical that economist likes to invent like Giffen goods?
If a market has an unstable equilibrium, its destiny is to die/desappear.
Using your graph, if the price goes upper than the initial equilibrum (demand=supply), then the higher the price, the lower the quantity supplied until it (the quantity) reaches zero, so the market deseappears.
If the the price goes lower than the initial equilibrium, then the lower the price, the higher the quantity supplied until the market is economically unsustanable (because the price becomes zero ) . The market desappears.
What markets in the present or in the past have suffered this? I don’t know any exact example, perhaps something with not much social impact.
If you have a decreasing-cost industry, you can have an unstable equilibrium. This sort of thing probably happens for a while in young, high-tech industries, while there are still significant economies of scale to exploit.
They don’t have unstable equilibriums, indeed can change over time in structure, but they must have a known equilibrium. For example, black markets provide goods hard to get in normal markets with a reasonable price (since many years in many countries). Heroin and other drugs in general provide those substances at high prices and they are still bought (low elasticity of demand). At the end. they are stable “markets”.