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(36 pts) Consider a stochastic version of the traditional cobweb model. The model was orig- inally developed to explain the volatility in agricultural prices, let
(36 pts) Consider a stochastic version of the traditional cobweb model. The model was orig- inally developed to explain the volatility in agricultural prices, let the market for a product. dt = a - ypt St = b + Bp+ + E (1) St = at (a) (4 pts) Please explain the meaning of each equation in the model? What is sign of Y and ? Why? How do you assume p? What is meaning of your assumption for pt in this model. (b) (4 pts) What is price and quantity of the agricultural product in the long-rum equilib rium
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