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Cobweb Model

slope of D
slope of S
initial D
initial S
starting price,
P
0
number of iterations
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
q
of goods. However, depending on the quantity supplied, buyers will bid a suitable price
p
. 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.
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