EEP 147: Section # 1 Solutions
GSIs: Shelley He & Daniel Kannell
January 30 & February 1, 2019
Perfect Competition: Equilibrium
1. Suppose the market for corn is perfectly competitive with the aggregate demand func-tionQD(P) = 16-2Pand the aggregate supply functionQS(P) = 4P-8.(a) Derive functions for inverse demand and inverse supply.
(b) Find the competitive equilibrium price (P*) and quantity (Q*).
(c) Sketch a graph of inverse demand, inverse supply, and the competitive equilibrium.
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Section #1 Solutions
EEP 147, Spring 2019
(d) President Trump decides to thank his voters in the corn belt through his newpolicy, The Make Corn Great Again Act of 2017. Under this policy, the federalgovernment pays farmers $1.50 for each unit of corn they produce. How mightyou expect President Trump’s policy to change the supply and demand of corn?(Assume that this$1.