Assignment Two 2.1.08

# Assignment Two 2.1.08 - Assignment Two AGEC 505...

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Assignment Two. AGEC 505. Agricultural Market Structures. Spring 2008. Due: 11:30 AM, Friday, February 1, 2008. Turn in TYPED hard copy before class. Assignments turned in after 11:30 AM will be marked 10 percent off. This late policy will be strictly enforced . Assignments turned in after the deadline will be marked 10 percent off each day that they are late (for example, an assignment due on Friday that is turned in on Monday will be marked 40 percent off). Exceptions will be granted in advance by the instructor. ***NOTE: ALL ASSIGNMENTS MUST BE TYPED*** READ : Chapter 2, Sections 4.4 and 8.6 1. (5 pts) Kansas: The Wheat State The inverse demand and supply curves for wheat in Kansas are given by: P = 18 – 2Q d and P = 2 + 2Q s , where P is the price of wheat in USD/bu and Q is the quantity of wheat in billion bushels. a. (1 pt) Calculate the equilibrium price and quantity of wheat. b. (1 pt) Define and explain the term, “consumer surplus” (CS). c. (1 pt) Define and explain the term, “producer surplus” (PS). d. (1 pt) Identify the areas of CS and PS on a graph. e. (1 pt) Calculate the level of CS and PS in the Kansas wheat market. 2. (5 pts) The Elasticity of Demand ( η ) We will see throughout the semester that one of the most important determinants of a business firm’s success is the elasticity of demand: how consumers respond to a change in product price. Explain the intuition why elasticity varies along a linear demand curve. Describe what implications this has for a business firm. 3. (5 pts)

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## This note was uploaded on 04/29/2008 for the course AGEC 505 taught by Professor Barkley during the Spring '08 term at Kansas State University.

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Assignment Two 2.1.08 - Assignment Two AGEC 505...

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