The law of supply-and-demand is an important principle in economics. If the price of a product increases, the quantity supplied will rise as more producers attempt to capitalise on the increased price. However, if supply increases then price will decrease, as more suppliers creates more competition. A mathematical model for the relationship between the price Pa and quantity Q. at yearly intervals is the system of difference equations, Pn+1 P-0.1(Q-500). Qn+1Qn+0.2(P-100), (7a) (7b) where n represents the year. (a) What do the constants -0.1 and 0.2 in Equations (7a) and (7b) represent? (b) Find all combinations of equilibrium values, (p, q), associated with the differenc equation model, Equation (7). What do the equilibrium values represent?

The law of supply-and-demand is an important principle in economics. If the price of a product increases, the quantity supplied will rise as more producers attempt to capitalise on the increased price. However, if supply increases then price will decrease, as more suppliers creates more competition. A mathematical model for the relationship between the price Pa and quantity Q. at yearly intervals is the system of difference equations, Pn+1 P-0.1(Q-500). Qn+1Qn+0.2(P-100), (7a) (7b) where n represents the year. (a) What do the constants -0.1 and 0.2 in Equations (7a) and (7b) represent? (b) Find all combinations of equilibrium values, (p, q), associated with the differenc equation model, Equation (7). What do the equilibrium values represent?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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