Cobweb model

Okay, imagine there's a farmer named Bob. Bob grows apples and he wants to sell them at the market. But before he can sell them, he needs to know the right price to charge.

Bob hears from other farmers that the current price of apples is $2 a pound. So he decides to sell his apples at $2 a pound too. But soon enough, Bob finds out that he's not selling all his apples. He has some left over because not enough people are buying at that price.

Now Bob has a problem. He needs to sell these leftover apples, but he also needs to make money. So he lowers the price of his apples to $1.50 a pound, hoping that more people will buy them. And it works! More people start buying his apples.

But then, the other farmers hear about Bob's lower price, and they lower their prices too. Now the price of apples is down to $1 a pound. Bob is making less money on his apples, but he's still selling them.

But then, there's a problem. All the farmers lowered their prices at the same time, and now there's too many apples in the market. There's so many apples that they can't all be sold! Bob has to throw some of his apples away because he can't sell them.

So Bob decides to plant less apple trees next year, hoping that he'll have less apples and they can all be sold at a higher price. But then, the other farmers do the same thing, and there's not enough apples in the market! The price goes up again.

And so, the cycle continues. The prices of apples go up and down in a pattern like a cobweb. That's why it's called the cobweb model.