hw8a - ECON475 HW #8 Answers = = 1. + - 1- + 1- =...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ECON475 HW #8 Answers = = 1. + - 1- + 1- = Steady-state value For the following cases, draw diagrams. Best way to do is giving values and looking at what happens, then analyzing mathematically. a. -, -1 , - lim < Thus there is no converge to the steady state. b. 0, 1 , < lim - = - when t is even. = when t is odd. lim - Thus, c. Thus there is no converge to the steady state. d. < -1, > > 1, Under the conditions given above, lim approaches to = as . 1- =0 - =. Thus there is no converge to the steady state. e. lim = 1, - - = lim lim > - - = when t is even. = - when t is odd. + = = . 1- 1- 1- The system is at its the steady state. = -1, < =0 f. Case I: = -1 - 1- + 1- 2 = 1- , - , - , , Case II: > 2 - , = , = 2 , given 2 < - ,2 - > . , < In both cases, the system does not converge to the steady state value. 2. Consider the following demand and supply functions: - = 2 = - Then, Also, a. If = = + = + and =- - = + . - <2 , then | | < 1. = and lim = Thus the price converges to b. If > 2 Assume , then | | > 1. < . Then, lim , regardless of the initial price. =0 - - = = Assume > - - . Then, lim Thus the price diverges from to c. If =2 , then | | = 1. < > , unless = 2 = - . Case I: Case II: lim thus, 2 - thus, 2 - + - > . The prices oscillate between < . The prices oscillate between and . and . In conclusion, if supply is more elastic than the demand, the equilibrium is not stable. ...
View Full Document

This note was uploaded on 05/26/2010 for the course ECON 475 taught by Professor Voyvoda during the Spring '10 term at Middle East Technical University.

Ask a homework question - tutors are online