Question

PLEASE TYPE AND DRAW GRAPH ELECTRONICALLY. ( NO HANDWRITING)

2. The following table contains information about the wheat market:

Price per Bushel (dollars)	Quantity Demanded (bushels)	Quantity Supplied (bushels)
$2	40,000	0
4	34,000	4,000
6	28,000	8,000
8	24,000	16,000
10	20,000	20,000
12	18,000	28,000
14	12,000	36,000
16	6,000	40,000

Draw (Electronically) and label a graph representing this market (demand curve, supply curve, etc.) What is the market price of wheat in this market, and what is the total revenue to farmers at that price? If the farmers then band together and set a price floor of $14 per bushel, what will their total revenue be? Label these two revenue areas on your graph.

PLEASE DO NOT HAND WRITE GRAPH PLEASE DO IT ELECTRONICALLY.

• How would the DEMAND CURVE shift if there was…

1. An increase in income and the good is a normal good
2. A decrease in the price of a substitute good
3. A decrease in population
4. An increase in the taste for the good
5. A decrease in the price of a complimentary good

• How would the SUPPLY CURVE shift if there was…

1. A decrease in the number of firms in the market
2. A decrease in the current price of the product
3. An increase in productivity
4. A decrease in the expected future price of a product
5. An increase in the price of an input

Answer 1

(1)

(A) Graph as follows.

(B) Equilibrium is at point E where demand and supply curves intersect with price P0 (= $10) and quantity Q0 (= 20,000).

(C) Total revenue = P0 x Q0 = Area 0P0EQ0 = $10 x 20,000 = $200,000

(D) When floor price (Pf) = $14, Quantity demanded falls to 12,000 (= Qd) and quantity supplied rises to 36,000 (= Qs). Since sellers can sell only what consumers will buy, market quantity is 12,000 and revenue is ($14 x 12,0000) = $168,000 (area 0PfFQd).

NOTE: As per Answering Policy, 1st question is answered.