Refer to Example 2.5 (page 59 ) on the market for wheat. In 1998 , the total demand for U.S. wheat was $Q=3244-283 P$ and the domestic supply was $Q_{S}=1944+207 P .$ At the end of $1998,$ both Brazil and Indonesia opened their wheat markets to U.S. farmers. Suppose that these new markets add 200 million bushels to U.S. wheat demand. What will be the free-market price of wheat and what quantity will be produced and sold by U.S. farmers?
Added by Kari F.
Step 1
First, we need to update the demand equation to account for the additional 200 million bushels from Brazil and Indonesia. The new demand equation will be: $Q_{D} = (3244 + 200) - 283P = 3444 - 283P$ Show more…
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Refer to Example 2.5 on the market for wheat. In 1998 , the total demand for U.S. wheat was $Q=3244-283 P$ and the domestic supply was $Q_{s}=1944+207 P .$ At the end of $1998,$ both Brazil and Indonesia opened their wheat markets to U.S. farmers. Suppose that these new markets add $200 mathrm{mil}$ lion bushels to U.S. wheat demand. What will be the free-market price of wheat and what quantity will be produced and sold by U.S. farmers?
Md.Daniyal A.
Much of the demand for U.S. agricultural output has come from other countries. In $1998,$ the total demand for wheat was $Q=3244-283 P .$ Of this, total domestic demand was $Q_{D}=1700-107 P$, and domestic supply was $Q_{s}=1944+207 P .$ Suppose the export demand for wheat falls by 40 percent. a. U.S. farmers are concerned about this drop in export demand. What happens to the free-market price of wheat in the United States? Do farmers have much reason to worry? b. Now suppose the U.S. government wants to buy enough wheat to raise the price to $\$ 3.50$ per bushel. With the drop in export demand, how much wheat would the government have to buy? How much would this cost the government?
Suppose that the demand curve for wheat in each country is inelastic up to some "choke" price $p^{*}-\mathrm{a}$ price so high that nothing is bought-so that the demand curve is vertical at $Q^{*}$ at prices below $p^{*}$ and horizontal at $p^{*} .$ If $p^{*}$ and $Q^{*}$ vary across countries, what does the world's demand curve look like? Discuss how the elasticity of demand varies with price along the world's demand curve.
Manasvee S.
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