Differential Equations in Economics

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Multiple Choice

In a simple economic model, the demand for a product is given by the differential equation (\frac{dQ}{dt} = -aQ + bP), where (Q) is the quantity demanded, (P) is the price, (a) and (b) are positive constants. What is the equilibrium price?

  1. $\frac{b}{a}$
  2. $\frac{a}{b}$
  3. $\frac{a+b}{2}$
  4. $\frac{a-b}{2}$
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