Which statement best describes the cobweb model in the course material?

### Why this is right The cobweb model concerns time lags between current prices and later production decisions. Because output responds to earlier prices, the market may experience cycles in price and production. ### The concept A production lag means sellers cannot adjust output instantly to current market conditions. Their decisions based on earlier prices may affect later supply, which can contribute to cyclical movements. ### The other options - **B. It shows that prices never change after a supply shift**: The model concerns possible cycles, not fixed prices. - **C. It explains demand shifts caused only by consumer tastes**: The cobweb model focuses on production responses and time lags. - **D. It assumes production changes immediately in response to current prices**: A time lag is central to the description. ### Terms - **Cobweb model**: A model of possible price and output cycles caused by delayed production responses to earlier prices. ### Remember Look for a production decision today that responds to a price observed earlier.