Question: Let the demand and supply functions be Qd = a-b Q1: Let the demand and supply functions be b Qa = a--P m 4 2

Let the demand and supply functions be

Qd = a-b

Q1: Let the demand and supply functions be b Qa = a--P m 4 2 - P n -P", (a, b > 0) Qs = -c+- - P, (c, f > 0 ) (a) Assuming market clearance at every point of time, write the differential equation of model. [5] (b) Find the intertemporal equilibrium price P and the market-clearing equilibrium price P*. [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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