Question

2. What are the determinants of supply? What happens to the supply curve when any of these determinants changes? Distinguish between a change in supply and a change in the quantity supplied, explaining the cause(s) of each. (15 Points) 3. True or False: A "change in quantity demanded" is a shift of the entire demand curve to the right or to the left. Explain (10 Points) 4. Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Suppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling? Explain carefully the main effects of a price ceiling. Demonstrate your answer graphically. Next, suppose that the govermment establishes a price floor of $4.60 for wheat. What will be the main effects of this price floor? Demonstrate your answer graphically. (15 Points) Thousands of Bushels Demanded Price $3.40 $3.70 $4.00 $4.30 $4.60 $4.90 85 80 75 70 65 60 Thousands of Bushels Supplied 71 73 75 79 81

Can you answer #'s 2-4?

Answer 1

2. The determinants of demands are market size, income, consumer expectations, consumer tastes and preferences and related goods.

If any of the determinants will change, it will lead to shift in demand or movement along the curve due to increase or decrease in demand. It will shift the demand curve, except its own price which is moving along the demand curve.

Change in demand is the relatioship between various prices and quantities which the consumers are willing to buy holding the things constant. In general consumers are willing to buy more products at lower prices and less products at higher prices.

The movement along curve the shifted curve is the curve is redrawn and shifts to right or left. The shift in D-curve results from consumer expectations, consumer tastes and preferences, change in price of related goods and income.