2009Problem_Set_10

# 2009Problem_Set_10 - AEM 4150 Price Analysis Fall Semester...

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AEM 4150 Price Analysis Fall Semester 2009 Homework Assignment 10 This assignment is due at the beginning of class on Thursday, December 3. Total 11 points Question 1 The market for wheat has the following market supply and demand functions: Q s = 10 + 25P Q d = 500 – 10P Where Q s and Q d are quantity supplied and demanded (in million bushels) and P is price per bushel. (a) Under no government involvement, what is the equilibrium price and quantity? Solve for the solution algebraically and graphically. (2 points) (b) Now suppose the government adopts a price support program. If the support price is \$15 per bushel, what do the consumers pay?, what do the producers get?, and what are the total costs born by the government? Solve for the solution algebraically and graphically. (2 points) (c) Suppose the government adopts a target price-deficiency payment program with a target price of \$15. Under this scenario, what would be the effective producer price, consumer price, quantity sold in the market, and total deficiency payment by the government (cost for the government)?

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