Answer to Question #221681 in Macroeconomics for GabrielIe

Question #221681

In the the market for Fante Kenkey, 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?

Expert's answer

The attached images below is the solution for the question.The solutions are labelled as a,b, and c.