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Cobweb Equation

The simple first-order difference equation

y_(t+1)-Ay_t=B,
(1)

where

A=-(m_s)/(m_d)
(2)
B=(b_d-b_s)/(m_d)
(3)

and

D_t=-m_dp_t+b_d
(4)
S_(t+1)=m_sp_t+b_s
(5)

are the price-demand and price-supply curves, where -m_d and b_d represent the slope and D-intercept, respectively, for the demand curve, and m_s and b_s represent the corresponding constants for the supply curve (Ezekiel 1938, Goldberg 1986).

A class of behaviors related to this equation is known as "Cobweb phenomena" in economics.

See also

Difference Equation

This entry contributed by Ronald M. Aarts

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References

Ezekiel, M. "The Cobweb Theorem." Quart. J. Econ. 52, 255-280, 1938.Goldberg, S. Introduction to Difference Equations, with Illustrative Examples from Economics, Psychology, and Sociology. New York: Dover, 1986.

Referenced on Wolfram|Alpha

Cobweb Equation

Cite this as:

Aarts, Ronald M. "Cobweb Equation." From MathWorld--A Wolfram Web Resource, created by Eric W. Weisstein. https://mathworld.wolfram.com/CobwebEquation.html

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