The demand and supply functions for corn are as follows. The quantity is in thousands of...

The demand and supply functions for corn are as follows. The quantity is in thousands of bushels and the price is in dollars per bushel.

QD = 1000 – 100 P

QS = - 245 + 90 P

A. What are the equilibrium price and equilibrium quantity in this market? Round your answers to 2 decimal places.

B. Graph this market and label all relevant points (equilibrium points, intercepts, axis labels, etc.).

C. Calculate the consumer surplus at the equilibrium price. Shade in the area associated with the consumer surplus in the graph in part B.

D. Assume that the government sets a price floor at $ 7.50 per bushel. Will this create a surplus of shortage in the market for corn? Calculate the surplus or shortage. Calculate the consumer surplus after the price floor.

E. Assume that the price of soybeans (a substitute in production for corn) increases. Use a supply and demand graph to analyze the impact on the price and quantity of corn sold in the corn market. Briefly describe your results.

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Expert Solution

Rahul Sunny answered 1 year ago

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