Cobweb Theory in Economics

Cobweb Theory in Economics

Assessment

Interactive Video

Business

9th - 10th Grade

Hard

Created by

Patricia Brown

FREE Resource

The video tutorial provides an overview of difference equations, focusing on the first order difference equation due to its simplicity and widespread use. It illustrates an economic problem involving a farmer adjusting prices based on supply and demand, leading to a discussion on market dynamics. The Cobweb Theory, introduced by Nicolas Kelder in 1934, is explained as a model describing the cyclical behavior of supply and demand due to time lags and price fluctuations. The theory's application in various markets, such as agriculture and housing, is also discussed.

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10 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the primary reason the first order difference equation is more widely used?

It requires more data.

It is less applicable.

It is easier to understand.

It is more complex.

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What action does the farmer take when he finds demand greater than supply?

Stops selling.

Raises the price.

Increases the supply.

Lowers the price.

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What happens to demand when the price remains high for a prolonged period?

Demand becomes unpredictable.

Demand increases.

Demand remains constant.

Demand gradually falls.

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What does the Cobweb Theory explain in economics?

Linear growth of markets.

Immediate market equilibrium.

Circular behavior of demand and supply.

Constant price levels.

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Who coined the term 'Cobweb Theory'?

Milton Friedman

Nicolas Kaldor

John Maynard Keynes

Adam Smith

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In which year was the Cobweb Theory introduced?

1924

1934

1954

1944

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which sector is NOT mentioned as an example of the Cobweb Model?

Technology sector

Livestock herd

Housing sector

Rational expectations equilibrium

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