Concept Question 3.4 Consider the market for wheat where demand is given by a-150-2p and supply is given by a 60 1p...

Question

Question

Answer 1

Answer #1

Setting the qd=qs

150-2p = 50+1p

150-50 = 1p+2p

100 = 3p

p = 100/3 = 33.33

q = 150-2*33.33 = 83.34

When Q = 78.34

78.34= 150-2p

p = 71.66/2 = 35.83

and the price that the producers would be willing to accept

78.34 = 50+p

p = 28.34

DWL = 0.5*(83.34-78.34)*(35.83-28.34) = 18.75 or 19

Answer 2

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