Find its price adjusts in proportion to excess demand

Reference no: EM131482458

Question: A raw commodity is traded in a market where it has been reliably estimated that

Q_d = 95 - 1.8P and Q_s = -12.4 + 2.1P

Its price adjusts in proportion to excess demand at the rate

dP = 0.28(Q_d - Q_s)
dt

where t is measured in months. The current spot price is $29.35 a tonne. In 4 months' time your company will need to buy a large amount of this commodity. If someone offers you a forward contract and guarantees to supply the amount you need at a price of $24.75 would it be worth signing this contract?

Reference no: EM131482458

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