Question

Consider again the demand function for corn in this formula: Qd corn = 5-2P corn + 4P potatoes - .25 butter + .0003M. Where Qd Corn is the amount of corn demanded per year in billions of bushels; p corn is the price of corn per bushel; p potatoes and P butter are the price of potatoes and butter per pound, respectively and M is the consumers' average annual income. !a. Graph the corresponding demand curve when the potatoes and butter cost $0.75 and $4 per pound, respectively and the average income in $40,000 per year. At what price does the amount demanded equal 15 billion bushels per year?

Answer 1

The demand equation is

where, Q_d is the demand for corn, P_c is the per unit price of corn, P_{p is the per unit price of potato,} P_b is the per unit price of butter and M is the average income.

when P_p= 0.75 and P_b = 4.00, and M = 40000

Then the demand equation for corm will be

  

is the demand curve

To give a graphical representation of this demand curve we will calculate the values of Q_d at different price level ( which is shown in the following table). The graphical representation of this demand curve is given by the following figure.

Put  Q_d = 15,in the demand equation     

we obtain 15 = 127 - 2 P_c

P_c = (127 -15)/2 = 56.

Therefore, at $ 56, the demand equals 15 billion bushels per Year.