Question: Let the demand and supply functions be = /4 /2 /2 , (, > 0) = + /4 , (, > 0 ) (a) Assuming

Let the demand and supply functions be

= /4 /2 /2 , (, > 0)

= + /4 , (, > 0 )

(a) Assuming market clearance at every point of time, write the differential equation of model. [5] (b) Find the intertemporal equilibrium price and the market-clearing equilibrium price . [2] (c) Write the characteristic equation. And solution of characteristic equation. [2] (d) State the condition for not having a fluctuating price path. [2] (e) State the condition for having a fluctuating price path. [2] (f) State the condition for having dynamically stable fluctuating path. [2]

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