HW chap 2


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Unformatted text preview: - hill.c om/hm.tpx? todo= pr intvie w 2/9 1/14/14 Assignme nt Pr int Vie w Worksheet Section: Market Equilibrium Consider the following demand and supply functions for corn: Demand is given by Supply is given by where P is the price in dollars and Q is the quantity in billions of bushels. Suppose the government needs to buy 5.6 billion bushels of corn for a third­world famine relief program. Instructions: Round your answers to 2 decimal places. a. What is the equilibrium price of corn before the government purchase? $ 3.00 ± .03 . b. What is the equilibrium price of corn after the government purchase? $ 3.80 ± .03 . rev is ed jrl 08­09­2011 Explanation: To find equilibrium price before the government purchase we set supply equal to demand: The effect of the government purchase will be to reduce the available quantity supplied by 5.6 billion bushels. Therefore, the new supply function is given by Demand is given by At equilibrium Equilibrium price equals $3.800, and equilibrium qua...
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