Question: Given qd t = a bpt qs t = c + dpe t pe t = pt1 e(pt1 pt2) (i) Show that

Given qd t = a − bpt qs t = c + dpe t

pe t = pt−1 − e(pt−1 − pt−2)

(i) Show that if in each period demand equals supply, then the model exhibits a second-order nonhomogeneous difference equation for pt.

(ii) Use a spreadsheet to investigate the path of price and quantity for the parameter values a = 10 c = 2 e = 0.5 b = 3 d = 1

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