Question

Suppose that the rate of change of the price "x " of a good increases in the
time at a constant ratio "c" as a result of inflation
constant, at the same time falls proportionally to the difference
between supply "y" at time "t" and some equilibrium supply "y0", is
say x´ (t) = c - a (y - y0). It is also assumed that the exchange rate
of the offer is proportional to the difference between the price and some
equilibrium price "x0", that is y´ (t) = b (x - x0), where "a" and "b" are
positive proportionality constants. Assuming that in
t = 0, x = x0 and y = y0.

i) Do the price and / or the offer oscillate around x0 and y0 + c / a,
respectively?

ii) If at time t = T0 the price is maximum, at what time is the supply
maximum?

Answer 1