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Consider a market for wheat. Suppose the supply and demand curves are linear, namely Supply: Qs...

Consider a market for wheat. Suppose the supply and demand curves are linear, namely

Supply: Qs = 120 + 240P Demand: Qd = 300 - 120P

a) (5%) What is the equilibrium price and quantity?

b) (5%) What is the price elasticity of demand at the equilibrium? What is the price elasticity of supply at the equilibrium?

For part c and d below, suppose that a drought changed the supply curve and the new equilibrium price is $1.00 per bushel.

c) (5%) What is the new quantity of demand? What is the new elasticity of demand?

d) (5%) Suppose the new supply curve is a quadratic equation, namelySupply: Qs = a + b P^2and the new elasticity of supply is 1/3. Please find the value of a and b.

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