What are the limitations of cobweb theory?

Answer 1

Cobweb theory has several limitations, including its assumption of fixed expectations among producers, which may not reflect real-world decision-making where expectations can change based on new information. Additionally, it typically considers a single market and overlooks interactions with other markets or external factors that can influence supply and demand. The model also assumes a linear relationship between price and quantity, which may not hold in more complex economic environments. Lastly, it may oversimplify the time lag in production adjustments, failing to account for varying production cycles across different goods.