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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(4 pts) If assume that all shocks are zero in each period and p0 = (a b) / (7 + 5), what is pt? If 330 is the initial price of the model, how does the model work in the system? (4 pts) What is impact multiplier, oneperiod multiplier and impact reSponse function in the model? If gap between the periods of the shock and price increases, how does impact reSponse function change? Why do we need th econdition of converge in this model for the impact response function
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