According to the note, under what condition is a normal cobweb pattern stable?

### Why this is right The note states that a stable cobweb requires the supply curve to be steeper than the demand curve and the price elasticity of demand to exceed the price elasticity of supply. Under this condition, successive output and price responses move toward equilibrium rather than away from it. ### The concept In a cobweb model, producers make output decisions based on an earlier price, so supply responds with a time lag. A high price can lead to greater production in the following period, creating excess supply and a lower price. Subsequent production cuts can then create excess demand and raise price again. Stability depends on the relative responsiveness of demand and supply. ### The other options - **The demand curve is steeper than the supply curve, and price elasticity of supply exceeds price elasticity of demand**: this reverses the note's stability condition. - **Demand and supply are both perfectly inelastic**: this does not describe the stated cobweb stability condition. - **Price never affects production decisions**: the cobweb mechanism depends on price influencing later production. ### Terms - **Cobweb model**: a dynamic model in which production responds to prices from an earlier period. ### Remember A cobweb needs a time lag; stability depends on relative demand and supply responsiveness.