Cobweb Model

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This Demonstration shows how time lags can lead to chaotic dynamics even with monotonic supply and demand curves in a simple competitive market model. Given an initial price level, sellers supply a certain quantity of goods. However, depending on the quantity supplied, buyers will bid a suitable price . In the next iteration, sellers will supply a new quantity of goods depending on the previous quantities and prices bid. Such cobweb dynamics can create price convergence, singularities, and limit cycles.

Contributed by: Samuel G. Chen (March 2011)
Open content licensed under CC BY-NC-SA


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