USE OF LINEAR DIFFERENCE EQUATIONS IN ECONOMICS
Abstract
The article examines the use of linear difference equations in modeling economic processes and evaluating their effectiveness for describing market and socio-economic dynamics. Special attention is given to the Evans model, which explains how the market price gradually converges to a new equilibrium value determined by demand and supply conditions. Examples illustrate monotonic convergence and oscillatory approaches to equilibrium, as well as conditions for price stabilization. The cobweb model is also analyzed, highlighting cases where price behavior becomes cyclical or diverges, forming a spiral trajectory. Additionally, a model of unemployment dynamics is presented, resulting in a formula for the steady-state unemployment rate, consistent with classical macroeconomic theories. The study underlines the value of difference equations as a versatile tool for forecasting economic processes, modeling market mechanisms, and identifying long-term trends in economic development..
References
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