Which of the following difference equations represents the reduced form of the market model
$\begin{array} { l }
Q _ { S t } = a P _ { t } - b \
Q _ { D t } = - c P _ { t } + d \
P _ { t } = P _ { t } - 1 - e ( Q S t - 1 - Q D t - 1 ) ?
\end{array}$
A) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 - e ( b + d )$
B) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 - e ( b - d )$
C) $P _ { t } = ( 1 + a e - c e ) P _ { t } - 1 + e ( b + d )$
D) $P _ { t } = ( 1 - a e + c e ) P _ { t } - 1 + e ( b - d )$
E) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 + e ( b + d )$

Question

Which of the following difference equations represents the reduced form of the market model 
$\begin{array} { l } 
Q _ { S t } = a P _ { t } - b \
Q _ { D t } = - c P _ { t } + d \
P _ { t } = P _ { t } - 1 - e ( Q S t - 1 - Q D t - 1 ) ?
\end{array}$
A) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 - e ( b + d )$
B) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 - e ( b - d )$
C) $P _ { t } = ( 1 + a e - c e ) P _ { t } - 1 + e ( b + d )$
D) $P _ { t } = ( 1 - a e + c e ) P _ { t } - 1 + e ( b - d )$
E) $P _ { t } = ( 1 - a e - c e ) P _ { t } - 1 + e ( b + d )$

Quizplus · Accepted Answer

The Answer is E

Which of the Following Difference Equations Represents the Reduced Form