Derive the difference equation which will calculate price

Reference no: EM131482439

Question: 1. In a market where

Q^d1 = 160 - 20P_t and Q^s_t = -80 + 40P_t-1

quantity unexpectedly drops from its equilibrium value to 75. Derive the difference equation which will calculate price in the time periods following this event.

2. If Q^d_t = 180 - 0.9P_t and Q^s_t = -24 + 0.8P_t-1say whether or not the long-run equilibrium price is stable and then use the difference equation method to calculate price in the thirtieth time period after a sudden one-off increase in quantity to 117.

Reference no: EM131482439

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