markets5 - Additional Problem #5: Market Analysis 1....

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Additional Problem #5 : Market Analysis 1. Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as follows: Thousands of bushels demanded Price per bushel Thousands of bushels supplied Surplus (+) or shortage (-) 85 $4.60 72 80 4.80 73 75 5.00 75 70 5.20 77 65 5.40 79 60 5.60 81 (a) What will be the market or equilibrium price? What is the equilibrium quantity? Using the surplus-shortage column, explain why your answers are correct. (b) Using the above data, graph the demand for wheat and the supply of wheat. Be sure to label the axes of your graph correctly. Label equilibrium price “P E ” and equilibrium quantity “Q E ”. (c) Why will $4.60 not be the equilibrium price in the market? Why not $5.60?
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2 “Surpluses drive prices up; shortages drive them down.” Do you agree? (d) Now suppose that the government establishes a ceiling price of, say, $4.80 for wheat. Explain carefully the effects of this ceiling price. Demonstrate your answer graphically (use the graph in part (b)
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This note was uploaded on 10/26/2009 for the course ECON 180-004-20 taught by Professor Bresnock during the Fall '09 term at UCLA.

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markets5 - Additional Problem #5: Market Analysis 1....

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