Question

- Suppose harvest season is upon us, and in your local market area supply of spring wheat is 18,000 tonnes. Demand during harvest period (and the six months afterwards) is given by (prices are per tonne):

D1 = 14000 – 10*P_{1}

Where D1 is demand for spring wheat in this first period, and
P_{1} is the price of spring wheat in the first period.
Demand for spring wheat in the second period is given by:

D2 = 8000 – 6*P_{2}.

Where D2 is demand for and P_{2} is the price of spring
wheat in the second period. Storage costs between the two periods
equals $20 per tonne.

- What is the equilibrium price of spring wheat in the second period?

Answer #1

Supply of spring wheat= 18000 tonnes

Demand in period 1, D1=14000-10*P1

Demand in period 2, D2=8000-6P2

Storage cost=$20 per tonne.

In equilibrium, there should be neither excess demand, nor excess supply. Prices should be such that the demanded quantity in both the periods is exactly equal to the total supply of wheat available

Thus S=D1+D2 in equilibrium.

Whatever is not demanded in period 1 is stored for the sale in period 2, thus the total storage cost= $20(S-D1)

In second period, in order to attain the equilibrium, demand in period 2 has to be equal to supply for period 2.

S-D1=D2

Hence equilibrium price in period 2 in terms of prices in period 1 is given by above expression

Suppose harvest season is upon us, and in your local market
area supply of spring wheat is 18,000 tonnes. Demand during harvest
period (and the six months afterwards) is given by (prices are per
tonne):
D1 = 14000 – 10*P1
Where D1 is demand for spring wheat in
this first period, and P1 is the price of spring wheat
in the first period. Demand for spring wheat in the second period
is given by:
D2 = 8000 – 6*P2.
Where...

Demand in Market 1: D1 = 24 - P1
Supply in Market 1: S1 = -2+ P1
Demand in Market 2: D2 = 19 - P2
Supply in Market 2: S2 = 2 + P2
1. If no trade occurs between the markets, what are the
equilibrium values of D1, S1, P1,
D2, S2, and P2? Solve
algebraically.
2. If the cost of transportation between the two markets is
PT = 2, what would be the equilibrium values of
D1,...

Storage Equilibrium
Assume that the market supply curve for potatoes is
Qs1 = 12 + 0.5P, and that there are two marketing
periods for the crop. In the first marketing period the demand
curve is: QD1 = 24 – P1, in the second period
it is: QD2= 18 - P2.
Draw a graph of the markets in the two periods showing prices
and quantities if it costs nothing to store potatoes. Be sure to
label all the relevant features on...

Assume that the market supply curve for potatoes is
QS1 = 12+0.5P, and that there are two marketing periods
for the crop. In the first marketing period the demand curve is:
QD1 = 24-P1, in the second period it is:
QD2 = 18-P2.
1. Draw a graph of the markets in the two periods showing prices
and quantities if it costs nothing to store potatoes. Be sure to
label all the relevant features on your graph. Insert an
image of...

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