Question: 1. In a market where
Qd1 = 160 - 20Pt and Qst = -80 + 40Pt-1
quantity unexpectedly drops from its equilibrium value to 75. Derive the difference equation which will calculate price in the time periods following this event.
2. If Qdt = 180 - 0.9Pt and Qst = -24 + 0.8Pt-1 say whether or not the long-run equilibrium price is stable and then use the difference equation method to calculate price in the thirtieth time period after a sudden one-off increase in quantity to 117.