3. At a price of $20 per tonne, the supply of wheat in Canada is 25...

3. At a price of $20 per tonne, the supply of wheat in Canada is 25 million tonnes and the demand is 30 million tonnes. When the price increases to $25 per tonne, the supply increases to 30 million tonnes and the demand decreases to 20 million tonnes. Assume both the demand and supply curves are linear.

3. At a price of $20 per tonne, the supply of wheat in Canada is 25 million tonnes and the demand is 30 million tonnes. When the price increases to $25 per tonne, the supply increases to 30 million tonnes and the demand decreases to 20 million tonnes. Assume both the demand and supply curves are linear. [15 points]

a. What is the equation for the demand curve for wheat?

b. What is the equation of the supply curve for wheat?

c. Using these equations, what is the equilibrium price and quantity of wheat? Draw and label these points on a graph.

d. If the government imposes a tax of $2 per unit, calculate the price buyers will pay, price sellers receive. Also, show this on the graph above.

e. What is the deadweight loss created by the tax?

Expert Solution

Rahul Sunny answered 2 years ago

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