Question

If the supply and demand functions are given by and, respectively, find the equilibrium price and quantity, and calculate the consumer’s and producer’s surplus.

Question Three

In the market for Fante Kenley, the supply and demand functions respectively are
and
When there is excess demand, price adjusts according to the equation

Find the long run equilibrium price, P* (that is, the price at which there is no excess demand or supply).
Formulate and solve he first order differential equation giving P as a function of time, t. Is this market dynamically stable or unstable?
If the initial price is P = 50, how close will the price be to its long run equilibrium value, when t = 10?

Answer 1

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