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  • 82 - VUSAME - Dynamics of Market Price - Numerical

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    Badd Mizaj
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    The document discusses the dynamics of market price using a numerical model. It considers an adjustment equation to model the market and finds expressions for the price and its derivatives when the adjustment speed is a constant. The model represents a non-homogeneous differential equation case. Substituting values into the solution shows the definite time-path of the market price, which dynamically decays over time, indicating the system is stable.

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    The document discusses the dynamics of market price using a numerical model. It considers an adjustment equation to model the market and finds expressions for the price and its derivatives when the adjustment speed is a constant. The model represents a non-homogeneous differential equation case. Substituting values into the solution shows the definite time-path of the market price, which dynamically decays over time, indicating the system is stable.

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    © All Rights Reserved
    Download as PPSX, PDF, TXT or read online from Scribd
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    6 views11 pages

    82 - VUSAME - Dynamics of Market Price - Numerical

    Uploaded by

    Badd Mizaj
    The document discusses the dynamics of market price using a numerical model. It considers an adjustment equation to model the market and finds expressions for the price and its derivatives when the adjustment speed is a constant. The model represents a non-homogeneous differential equation case. Substituting values into the solution shows the definite time-path of the market price, which dynamically decays over time, indicating the system is stable.

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    © All Rights Reserved
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    of 11

    Advanced Mathematical Economics

    Dynamics of Market
    Price: Numerical

    2/27/2021 DR. BILAL MEHMOOD 1


    Dynamics of Market Price: Numerical

     
    Consider the Market Model:

    Find expressions for , and


    when . Is this system stable or
    unstable?

    2/27/2021 DR. BILAL MEHMOOD 2


    Dynamics of Market Price: Numerical

     
    Solution: Given the
    adjustment equation , values
    of and can be substituted.

    2/27/2021 DR. BILAL MEHMOOD 3


    Dynamics of Market Price: Numerical

    2/27/2021 DR. BILAL MEHMOOD 4


    Dynamics of Market Price: Numerical

     
    Comparing with the standard
    form:

    Here , , ,

    2/27/2021 DR. BILAL MEHMOOD 5


    Dynamics of Market Price: Numerical

     
    Choice of Case of the
    Differential Equation:
    : Non-Homogenous Case.
    : Non-Homogenous Case with .
    Using the definite Solution of
    time-path of :

    Emphasizing on the values to be


    substituted:

    2/27/2021 DR. BILAL MEHMOOD 6


    Dynamics of Market Price: Numerical

    Substituting values of , , and


    respectively:

    2/27/2021 DR. BILAL MEHMOOD 7


    Dynamics of Market Price: Numerical

    It is the definite Time-Path of


    market price.

    2/27/2021 DR. BILAL MEHMOOD 8


    Dynamics of Market Price: Numerical

     
    Dynamic Stability: The
    expression; has an
    exponential decay term. i.e.

    2/27/2021 DR. BILAL MEHMOOD 9


    Dynamics of Market Price: Numerical

    2/27/2021 DR. BILAL MEHMOOD 10


    Dynamics of Market Price: Numerical

    END

    2/27/2021 DR. BILAL MEHMOOD 11

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