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Economics
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13 Feb 2018

In 1998, the total demand for US wheat was Qd = 3244 - 283P and the domestic supply was Qs = 1944 + 207P *both in millions*

At the end of 1998, both Brazil and Indonesia openered their wheat markets to US farmers.

Suppose that these new markets add 200 million bushels to US wheat demand.

1) What will be the free market price of wheat and what quantity will be produced and sold by the US farmers?

2) Use the demand curve to find the price elasticity of demand at the free market price

3) Use the supply curve to find the price elasticity of supply at the free market price

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Related questions

2. In the United States, 2007 was a bad year for growing wheat. And as wheat supply decreased, the price of wheat rose dramatically, leading to a lower quantity demanded (a movement along the demand curve). The accompanying table describes what happened to prices and the quantity of wheat demanded. 2006 2007 Quantity demand (bushels) 2.2 billion 2.0 billion Average price (per bushel) $3.42 $4.26 a. Using the midpoint method, calculate the price elasticity of demand for winter wheat. b. What is the total revenue for U.S. wheat farmers in 2006 and 2007? c. Did the bad harvest increase or decrease the total revenue of U.S. wheat farmers? How could you have predicted this from your answer to part a? 3. A recent study determined the following elasticities for Volkswagen Beetles: Price elasticity of demand = 2 Income elasticity of demand = 1.5 The supply of Beetles is elastic. Based on this information, are the following statements true or false? Explain your reasoning. a. A 10% increase in the price of a Beetle will reduce the quantity demanded by 20%. b. An increase in consumer income will increase the price and quantity of Beetles sold. Since price elasticity of demand is greater than 1, total revenue will go down.

The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:

QD=20,000,000-4,000,000P

QS=7,000,000+2,500,000P, where QD and QS are quantity demanded and quantity supplied measured in bushels, and P=price per bushel.

a.) Determine consumer surplus at the equilibrium price and quantity.

b.) Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply. How many bushels of wheat will the government be forced to buy? Determine consumer surplus with the price floor.

1. (40 points) The US market of rice is described by the following domestic supply and demand equations:

QdUS = 200 - 2 P , QsUS = -100 + 3 P

Where QdUS and QsUS represent the quantities demanded and supplied (in millions of tons) and P is the price per ton of rice (in hundreds of $).

But the US not only produces but also imports rice. Now assume that foreigners are allowed to sell rice in the US. Assume that the foreign supply equation is QsF = - 200 + 5 P

d) At this new equilibrium price, how much rice will US farmers produce? How much will be consumed and how much will be purchased from abroad? Show your work.

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