Saturday, May 4, 2013

Other aspects of price changes under demand shifts with non-ideal information transfer

Some more modeling following the previous post; in here we have a larger shift in the demand curve and a representative random walk of the price
Averaging over many paths, we get sticky prices, followed by a fall in price toward the new equilibrium
The prices are just sticky downward; upward shifts in the demand curve are accompanied by immediate reactions in the price
And again, the average
These two results in the traditional economics textbook pictures would look like this

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