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. Provide a fully labelled diagram to support your answer. Show all intercepts, equilibrium points, label axis and curves fully. 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? Calculate the consumer surplus with the price floor.
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. Provide a fully labelled diagram to support your answer. Show all intercepts, equilibrium points, label axis and curves fully. 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? Calculate the consumer surplus with the price floor.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 10PA
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This is 1 question with 2 sub-parts. Please answer both a and b as accurately as possible.
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