Consider a model of market demand and supply that has the following numerical form:
Qdt = 21 − 2Pt Qst = −3 + 6Pt Pt+1 = Pt − 0.3(Qst − Qdt)
Notice that the price-adjustment process is in terms of the inventory (Qst − Qdt). Find the time path Pt and determine whether it is convergent.

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25-06-2024
Business

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Consider a model of market demand and supply that has the following numerical form:
Qdt = 21 − 2Pt Qst = −3 + 6Pt Pt+1 = Pt − 0.3(Qst − Qdt)
Notice that the price-adjustment process is in terms of the inventory (Qst − Qdt). Find the time path Pt and determine whether it is convergent.

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