Answer to Question #237677 in Economics for Seth

Question

In the market of fante kenley, the supply and demand function respectively are Qs =0.25P+10 and Qd= 0.5P+100. When there is excess demand, price adjust according to the equation.

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

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

(c). If initial price is P= 50, how close will the price be to it long run equilibrium value when t= 100.

Answer 1

$$100-0.5p=0.25p+10$$

$$0.75p=90$$

$$p=120$$

$$Q=50$$