Construct a diagram to show a convergent cobweb. What are the key factors that determine if the cobweb is convergent or divergent?
0 User(s) Rated!

Words: 479
Views: 1618
Comments: 0
A convergent cobweb reflects a situation when price and quantity fluctuate in the long run due to expectations but eventually converge to the equilibrium price. A divergent cobweb on the other hand reflects a situation when price and quantity fluctuate due to expectations but instead of approaching equilibrium they constantly move further and further away from it. We observe the phenomenon of a cobweb in perfect competition when the assumption of perfect foresight is relaxed. A convergent cobweb is observed when demand is more elastic than supply whereas a divergent one is observed when demand is more inelastic than supply....
are sensitive to price changes the quantity demanded will still change even for small variations in output. At the same time given that supply is relatively inelastic quantity can't change by large margins so producers are forced to push their production towards the equilibrium point. On the other hand when supply is more elastic than demand producers have the capability to increase production according to expectations and producers are relatively insensitive to price changes so even at rather large increases in price they won't reduce consumption by as much as they would had they been sensitive to price changes.

are sensitive to price changes the quantity demanded will still change even for small variations in output. At the same time given that supply is relatively inelastic quantity can't change by large margins so producers are forced to push their production towards the equilibrium point. On the other hand when supply is more elastic than demand producers have the capability to increase production according to expectations and producers are relatively insensitive to price changes so even at rather large increases in price they won't reduce consumption by as much as they would had they been sensitive to price changes.
Abstract According to the Efficient Market Theory, it should be extremely difficult for an investor to develop a "system" that consistently selects stocks that exhibit higher than normal returns over a period of time. It should also not be possible for a company to "cook the books" to misrepresent the...
Words: 756
View(s): 535
Comment(s): 0
For over fifty years, sociologists and educators have been analyzing the relationship between a student's performance in secondary education and the socioeconomic status of his or her parents. These studies are often aimed at proving the harmful effect of poverty or divorce on a child's academic performance, and unfortunately...
Words: 1278
View(s): 1090
Comment(s): 0
Tourism is an economic activity associated with all types of traveling away from home, for business, pleasure or other reasons. Tourism is undoubtedly the largest industry in the world and generates lots of many for countries all around the world. In 1999, world tourism contributed 11.7% of world"s Gross Domestic...
Words: 763
View(s): 482
Comment(s): 0
Some say that sports in America are favored more by people who live elsewhere. I wonder why. Studies have shown that some people like the fact that most sports have some type of physical contact. Why is that most Americans rather watch sports on television than read a book, maybe...
Words: 3672
View(s): 2822
Comment(s): 0
There are many industries. Economist group them into four market models: 1 pure competition which involves a very large number of firms producing a standardized producer. New firms may enter very easily. 2 Pure monopoly is a market structure in which one firm is the sole seller a product or...
Words: 581
View(s): 633
Comment(s): 0