Question

1. Much of the demand for U.S. agricultural output has come from other countries. In 1998, the total demand (which is the sum of total domestic demand and total foreign demand) for wheat was Q_D=4200-250P. Of this, total domestic demand was Q_dom=2700-170P, and domestic supply was Q_S=1200+150P.

a. What is the demand function of the demand for wheat in foreign market Q_f?

b. What is the equilibrium price and quantity of the wheat market?

c. Suppose that China announces to decrease import of US agricultural products in response to the new tariffs imposed by the US government. The news prompts foreign demand for U.S. wheat to fall by 20 percent. What is the change in equilibrium price once the market clears again? What about the change in equilibrium quantity?

Now that Q_f shrinks by 20 percent, we have the new demand functions:

d. If the US government wants to restore the price of wheat to its original level, how much wheat should the government buy? How much would it cost?

Answer 1

Comin/ge Date O The demand furetien fol cwhal n yekat derived taking differerce fureign G0=400-250P -0 Aidem=2700-170p %3D 0-0den = (420-2500) -2706-17FOP) 4విరా -నికర O TO dekimino Eoilinrium pice and if Ounhh follachs Conftion mex be Satisly Qp-Qs y200-250p1200+150P -10:5 P=10.5 tagel Eouilibrium Quonhlyalfollan 25 Q0=4200-25op 2) 4200-950 X10:5

Comlin rs Sinve Imporitin Kulyls. cwbeal led to dalhe ninyponts Us demand wheno w o पि alcalamd IANuantit This Con be with by mulliplying Eouation coitho.2. -1500-80p :08/150-8Op) 1200-64P to =1200-648 3 derived by Nao tohel demand adding Eoualn Ths gues fellauls fuacken Jres Jollaws. falan482-27oo -170P +),200 -64p 3900-234P 3.900-2348. New Eoutibium fositim B. deived by Eouatiyiny EouaRm )with Eouahlim Bgupply alfilons =Qupy ২০০৭5০ 3900-234P = 1200+150P 2,7mo -384P P=z0325 New. Ech p=7-03125 pria

NOw pul Ne pa7.03/25 in f Dau Sp=3,900-234P =) 3,900 -234X7:03125 -)2,254.7 Ther new Eouilibium. Quiantib 8 22547 85 =3.900-234P 3,900-234X10os 21443 To tal demiand al Chiginal lavelpho 5 Ju. = 1200t150P suply. )200+/50X105 SttG domevi Suppy al origind letel priz 2,775 20 To maintrin pRce al.original laud gayennmen has to Surplu wheat al He pfu ğ S105 They Suiply heds Suuples -Syply-Demaind =)2775-143- 25 2l1332 This. Coss to Usgo velmat by/ $ 13,984