Business, 11.01.2020 05:31 Riohxncho

Much of the demand for u. s. agricultural output has come from other countries. in 1998, the total demand for wheat was q=3244-283p. of this, total domestic demand was qd=1700-107p, and domestic supply was qs=1944+207p. 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? do this step by step so i can understand how to solve this.

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Answer from: levicorey846

Solution:

a) In equilibrium , Q = 3244-283 P

Qs=1944+207 P

Q = Qs

3244-283 P = 1944+207 P

P = $2.65

Export demand = Total demand - Domestic dd

= 1544 - 176 P

Its given that export demand for wheat falls by 40% , so the new export demand is 0.6 [ 1544 - 176 P ] .

Total demand = Export dd + Domestic dd

= 2626.4 - 212.6 P

To find equilibrium ,

Total demand = Total supply

2626.4 - 212.6 P = 1944+207 P

P = $ 1.63

Q = 2280.65

Yes , Farmers will worry because of fall in price.

b) When P = $3.5

Qp = 2626.4 - 212.6 ( 3.5 )

Qp = 1882.3

Qs = 2668.5

Excess supply = Qs - Qp

= 2668.5 - 1882.3

= 786.2 Million Business

If U.S government gives a price of $3.5

Total spending = 3.5(786.2)

= $2751.7 Million

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