In the market for Fante Kenley, the supply and demand functions respectively are Q° = 0.25P+10 and Q° =-0.5P+100 When there is excess demand, price adjusts according to the equation 2-0.5(Q° -Q°) 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 Pas a function of time, 1. 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 the market for Fante Kenley, the supply and demand functions respectively are Q° = 0.25P+10 and Q° =-0.5P+100 When there is excess demand, price adjusts according to the equation 2-0.5(Q° -Q°) 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 Pas a function of time, 1. 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?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1E: The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales...

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