In the market for Fante Kenley, the supply and demand functions respectively are Qs = 0.25P+10 and -0.5P+100 When there is excess demand, price adjusts according to the equation dp/dt = 0.5(Qd – Qs) a) Find the long run equilibrium price, P* (that is, the price at which there is no excess demand or supply). b) Formulate and solve he first order differential equation giving P as a function of time, t. Is this market dynamically stable or unstable? c) If the initial price is P = 50, how close will the price be to its long run equilibrium value, when t = 10?

/in /by

In the market for Fante Kenley, the supply and demand functions
respectively are Qs = 0.25P+10 and  -0.5P+100

When there is excess demand, price adjusts according to the
equation dp/dt = 0.5(Qd – Qs)

a) Find the long run equilibrium price, P* (that is, the price at
which there is no excess demand or supply).

b) Formulate and solve he first order differential equation giving P
as a function of time, t. Is this market dynamically stable or
unstable?

c) If the initial price is P = 50, how close will the price be to its
long run equilibrium value, when t = 10?

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