Cobweb Model

Agricultural price cycles — supply/demand with lagged adjustment and convergence dynamics

Parameters

Demand curve (D)
Supply curve (S)
Cobweb path
Cobweb model: farmers decide how much to plant based on last period's price, but harvest happens the next period when supply meets current demand. This lag can generate price cycles.

Stability depends on the ratio of elasticities: if |supply slope / demand slope| < 1, cycles converge to equilibrium. If ratio > 1, cycles diverge. At ratio = 1, we get neutral cycles (permanent oscillation).

This explains why agricultural markets — pork, corn, hogs — can exhibit multi-year boom-bust cycles (the classic "hog cycle").