(a) Demand and supply of fuel in Namibia depends on the current price. Namibian fuel dealers...

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(a) Demand and supply of fuel in Namibia depends on the current price. Namibian fuel dealers determine their future prices on the basis of current price and excess demand. If excess demand for fuel increases, they raise price, while in the opposite case they lower it. The model they base their decision making is: Pt+1 = Pt + 0.6(QPQ), Po = N$37. The demand and supply function for fuel in Namibia are: QP = 120-5.5P and Q = 0.5P+ - 30. (i) Find the time path of fuel price in Namibia [9 marks] (ii) Present the sketch of the fuel price time path and discuss its dynamic stability. [4 marks] (b) In the case of Namibia's net investment model (t) = lg-ok (t), the gross investment is I, = 100, the rate of depreciation = 0.05, K(t) =stock of capital at time t and K(0) = (a) Demand and supply of fuel in Namibia depends on the current price. Namibian fuel dealers determine their future prices on the basis of current price and excess demand. If excess demand for fuel increases, they raise price, while in the opposite case they lower it. The model they base their decision making is: Pt+1 = Pt + 0.6(QPQ), Po = N$37. The demand and supply function for fuel in Namibia are: QP = 120-5.5P and Q = 0.5P+ - 30. (i) Find the time path of fuel price in Namibia [9 marks] (ii) Present the sketch of the fuel price time path and discuss its dynamic stability. [4 marks] (b) In the case of Namibia's net investment model (t) = lg-ok (t), the gross investment is I, = 100, the rate of depreciation = 0.05, K(t) =stock of capital at time t and K(0) =

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i To find the time path of fuel price in Namibia we can use the given model Pt1 Pt 06QP Q where Pt1 Fuel price at time t1 Pt Fuel price at time t QP Q... View the full answer