Economics Dynamics Problems 104

# Economics Dynamics Problems 104 - one equilibrium point....

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

88 Economic Dynamics Figure 3.1. 3.4 Equilibrium and stability of discrete dynamic systems If y t + 1 = f ( y t ) is a discrete dynamic system, then y is a Fxed point or equilibrium point of the system if f ( y t ) = y for all t (3.7) A useful implication of this deFnition is that y is an equilibrium value of the system y t + 1 = f ( y t ) if and only if y = f ( y ) ±or example, in the cobweb model (3.6) we have, p = a c b ± d b ² p Hence p = a c b + d where p 0if a c With linear demand and supply curves, therefore, there is only one Fxed point,
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: one equilibrium point. However, such a Fxed point makes economic sense (i.e. for price to be nonnegative) only if the additional condition a ≥ c is also satisFed. As with Fxed points in continuous dynamic systems, a particularly important consideration is the stability/instability of a Fxed point. Let y ∗ denote a Fxed point for the discrete dynamic system y t + 1 = f ( y t ). Then (Elaydi 1996, p. 11)...
View Full Document

## This note was uploaded on 12/14/2011 for the course ECO 3023 taught by Professor Dr.gwartney during the Fall '11 term at FSU.

Ask a homework question - tutors are online