Cobweb Equation

The simple first-order difference equation

(1)

where

			(2)
			(3)

and

			(4)
			(5)

are the price-demand and price-supply curves, where  and  represent the slope and -intercept, respectively, for the demand curve, and  and  represent the corresponding constants for the supply curve (Ezekiel 1938, Goldberg 1986).

A class of behaviors related to this equation is known as "Cobweb phenomena" in economics.

REFERENCES:

Ezekiel, M. "The Cobweb Theorem." Quart. J. Econ. 52, 255-280, 1938.

Goldberg, S. Introduction to Difference Equations, with Illustrative Examples from Economics, Psychology, and Sociology. New York: Dover, 1986.