A change in the marginal propensity to consume (c) within Samuelson's income model would directly affect the components of income change over periods. An increase in c would result in a larger proportion of income being consumed, potentially leading to larger fluctuations in income levels as more past income transitions directly to consumption. This could amplify cyclical behavior, increasing economic sensitivity to changes in initial conditions . Conversely, a decrease in c would mean less income is consumed, potentially stabilizing income fluctuations and reducing economic volatility, as investment would then have a relative increase in its proportional influence on total income calculation . These adjustments underscore the pivotal role of c in steering the economic growth patterns modeled.

Samuelson’s model derives total income (Yt) using the sum of consumption (Ct) and investment (It) at a given time t, expressed as Yt = Ct + It . Consumption in the model is a function of prior period's income Ct = cYt-1, while investment is a function of income change It = b(Yt - Yt-1). By substituting these expressions into the total income equation, Yt = cYt-1 + b(Yt - Yt-1), the process illustrates how current income is formed by the combination of consumption dependent on past incomes and investment driven by income changes . This synthesis captures the components and their interactions in determining total economic output.

The linear relationship between consumption and income in Samuelson's model implies that changes in income directly influence consumption levels, given a constant marginal propensity to consume (c). Economic policy can leverage this relationship to stimulate economic activity. For example, policies that increase disposable income, such as tax cuts or direct transfers, can have a proportional impact on consumption, thereby boosting overall economic demand. This model's assumptions suggest that effective fiscal policies should consider not only immediate impacts but also lag effects given income dependencies from previous periods . The model underscores the need for careful calibration of policy parameters to manage cyclical fluctuations and stabilize income over time .

The income difference equation is derived from the linear consumption and investment expressions in Samuelson's model: Yt = cYt-1 + b(Yt - Yt-1). By expanding and rearranging terms, the expression becomes Yt = cYt-1 + bYt - bYt-1, which can be rewritten by factoring Yt: Yt(1-b) = cYt-1 - bYt-1. Solving for Yt gives the difference equation: Yt = ((c - b) / (1 - b)) (Yt-1). This equation represents how the income at time t is determined by the modified previous period's income, incorporating parameters of consumption propensity and the investment accelerator. It demonstrates the response of income levels over time, factoring in economic behaviors described by the model .

In the Cobweb model, the initial price condition significantly influences subsequent price equilibrium because the model assumes that current price settings depend on those from the previous period . If the initial price Po deviates from the equilibrium price, subsequent calculated prices will reflect oscillations around the equilibrium due to lagged responses in supply and demand. For example, starting with an initial condition Po = 110, the model uses this input to derive subsequent prices based on demand and supply interaction expressed as 180 = 2pt + pt-1 . Solving this iteratively, one might go through steps like calculating p1 = 35, p2 = 72.5, p3 = 53.75, showing how past prices can propagate a cycle of adjustments before reaching a stable equilibrium . This demonstrates the importance of initial conditions and how they can affect the trajectory of price stabilization over time.

The sensitivity of the Cobweb model to initial price conditions is exemplified by its iterative calculations where initial price conditions (Po) initiate a sequence of price adjustments based on the set equations. The iterative process described by 180 = 2pt + pt-1 commences from an initial price, e.g., Po = 110. Each price calculated affects the next, and the magnitude and direction of these changes depend sensitively on the model parameters, such as the coefficients of demand and supply . For instance, a small alteration in the supply's reaction parameter or initial condition results in varying oscillation patterns or convergence which shows high sensitivity and dependency on initial conditions, reinforcing the stability or divergence of the sequences when disturbed . This underscores the fragile equilibrium managed by parameter precision.

Samuelson's model assumes that consumption (Ct) depends linearly on the income of the previous period (Yt-1) with a marginal propension to consume, c, such that 0 < c < 1, expressed as Ct = cYt-1 . Investment (It) depends on the change in income, represented as It = b(Yt - Yt-1), where b is the accelerator . These assumptions indicate that both consumption and investment are driven by previous income levels, establishing a baseline for predicting future changes in income (Yt). The relationship expresses income at time t using the equation: Yt = ((c - b) / (1 - b)) Yt-1, thus depicting how variations in income are influenced by both consumption’s and investment’s responsiveness to income changes .

The Cobweb model illustrates the relationship between current and previous period prices by depicting how the price at any given period (pt) is directly affected by the price of the previous period (pt-1). The equation for equilibrium, a - bpt = c + dpt-1 , shows that current demand and supply depend on the interplay of these prices. The solution process involves iteratively substituting previous period prices to find the current period prices. For example, starting with an initial price, Po, subsequent prices p1, p2, etc., are calculated by successive substitution: 2pt + pt-1 = 180 and given an initial Po = 110, the model computes p values in succession . This highlights how deviations in prices across periods can lead to fluctuations, representing dynamic adjustments which may eventually stabilize if parameters conform to certain conditions .

In the Cobweb model, equilibrium is determined by setting supply equal to demand, with demand D(p) and supply S(p) expressed in terms of price (p). Specifically, demand is D(p) = a - bp, and supply is S(p) = c + dp-1 . By equating supply and demand, and given the numerical representations D(p) = 80 - 2/3p and S(p) = 20 + 1/3p-1, equilibrium price over periods can be calculated iteratively . This model implies that equilibrium prices are influenced by previous prices, leading to potential fluctuations over time if past prices deviate significantly from the equilibrium. The evolution through the periods illustrates price adjustments that can oscillate or converge to a stable equilibrium depending on the parameters of demand and supply responsiveness .

For the Cobweb model to lead to price stabilization, certain mathematical conditions must be satisfied. Primarily, the slope of the supply curve must be steeper than the demand curve at the equilibrium point, meaning that supply is more responsive than demand within the periods—in mathematical terms, |d/b| > 1 . This ensures that fluctuations are dampened over time. Additionally, the parameters in the supply and demand expressions, such as in the iterative equation 180 = 2pt + pt-1, must be balanced to result in convergence rather than divergence, which is achieved when subsequent iterations display decreasing amplitude deviations from equilibrium . Stability emerges when the system’s corrective measures outweigh the inertia of price changes.