Question

The U.S. Department of Agriculture is interested in analyzing the domestic market for soybean. The USDA’s...

The U.S. Department of Agriculture is interested in analyzing the domestic market for soybean. The USDA’s staff economists estimate the following equations for the demand and supply curves: The demand curve of soybean is P = 700 - 2Qd, and the supply curve of soybean is: P = 200 + 3Qs where P represents price of soybean in dollars per bushel and Q represents quantity of soybean in bushels.

1. Suppose that the government passes a farm support bill that sets $600 per bushel as the minimum allowable soybean price in the market. How would this minimum price alter this market? Would there be any excess supply of soybean? If so, how much?

Homework Answers

Answer #1

Equilibrium is reached when quantity demanded equals the quantity supplied at a particular price. That is at a particular price where quantity demanded equals the quantity supplied is Equilibrium

P = 700 - 2Qd or 2Qd = 700 - P or Qd = 350 - 0.5P

P = 200 + 3Qs or 3Qs = P - 200 or Qs = 1/3P - 200/3

So 700 - 2Q = 200 + 3Q

3Q + 2Q = 700 - 200

5Q = 500

Q = 500/5 = 100 bushels of soyabean (Equilibrium Quantity)

P = 200 + 3* 100 = $500 (Equilibrium Price)

If the minimum price set is $600,

Then

P = 700 - 2Qd or 2Qd = 700 - P or Qd = 350 - 0.5P = 350-0.5*600 = 50

P = 200 + 3Qs or 3Qs = P - 200 or Qs = 1/3P - 200/3 = 1*600/3-200/3 = 200 - 200/3 = 400/3 = 133.3

Surplus/Excess supply = 133.33 - 50 = 83.33

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The United States Department of Agriculture is interested in analyzing the domestic market for corn. The...
The United States Department of Agriculture is interested in analyzing the domestic market for corn. The USDA’s staff economists estimate the following equations for the demand and supply curves: Qd= 1600-125P Qs= 440+165P Quantities are measured in millions of bushels; prices are measured in dollars per bushel. A. Calculate the equilibrium price and quantity that will prevail under a completely free market. B. Calculate the price elasticities of supply and demand at the equilibrium values. C. The government currently has...
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for...
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 11.5 – Q Supply: P = 5.5 + Q Price is in 10 Yuan (¥) per bushel of soybeans and the units for Quantity are 100 million bushels per year. This is to make graphing simpler. This does NOT mean that the price is 10 and quantity is 100. Rather it means...
Consider a closed economy. Suppose the market for corn in banana republic is competitive. The domestic...
Consider a closed economy. Suppose the market for corn in banana republic is competitive. The domestic market demand function for corn is Qd=18 -P and the domestic market supply function is Qs=P-2, both measured in billions of bushels per year. In order to help the corn industry, the government initiated a price support program by purchasing 2 billion bushels corn in the market. a) draw a graph to show the new market equilibrium price and quantity without calculating the number....
1. Your textbook discusses the benefits of cheaper imports on pages 171-173. Draw a graph that...
1. Your textbook discusses the benefits of cheaper imports on pages 171-173. Draw a graph that shows the effects on consumer and producer surplus (gain or loss) that result from a country importing a good. 2. Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 115 – 1/15Q     Supply: P = 55 + 1/15Q Where P is Yuan per bushel of...
Import Demand a) Draw a domestic market for sugar with a supply of P = .2+.1QS...
Import Demand a) Draw a domestic market for sugar with a supply of P = .2+.1QS (note: price is per pound and quantity is measured in thousands of tons) and a demand of P = 5 − .2QD b) If the world price of sugar is $1.20, how much money do consumers spend on imported sugar c) If a tariff of $0.20/pound is imposed, how many pounds of sugar are imported? d) Draw the import demand curve for sugar in...
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for...
Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations: Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year. The world price for soybeans is ¥65/bushel. 4. Who are the greatest benefactors of China’s tariff on US soybeans?
Demand function: P = 7 – 2Q Supply function: P = 4 + Q Where P...
Demand function: P = 7 – 2Q Supply function: P = 4 + Q Where P is the farm price in $/bushel and Q is quantity in billions (1,000,000,000s) of bushels sold. 1. a. Graph the Demand and Supply curves for wheat and find the equilibrium price and quantity of wheat sold in this competitive market. You can solve graphically or algebraically as two equations with two unknowns. Show your calculations.
The corn market is perfectly competitive, and the market supply and demand curves are given by...
The corn market is perfectly competitive, and the market supply and demand curves are given by the following equation: Qd =50,000,000 – 2,000,000 p Qs = 10,000,000 +5,500,000 p Where Qd and Qs are quantity demanded and quantity supplied measured in bushels, and P= price per bushel. 1) Determine consumer surplus at the equilibrium price and quantity.
Suppose the global Soybean market is competitive and currently has the following supply and demand functions:...
Suppose the global Soybean market is competitive and currently has the following supply and demand functions: QD = 700 – 0.5PS and QS = PS – 500. The market expects to see a 25% increase in the market price within a year due to change in demand. What will be the new equilibrium price and equilibrium quantity of the market keeping all other things constant? New P*= New Q*=
1. [10 pts] Assume that the market demand and supply curves for soybeans grown in Canada...
1. [10 pts] Assume that the market demand and supply curves for soybeans grown in Canada can be represented via the following: QD = 40 − 0.5Ps. Qs = 2.5 + 2.5Ps where PS is the soybean price ($/bushel) and QS is the quantity of soybeans produced (denominated in 100 million bushel units). (a) [10 pts] What is the equilibrium price, P*s, and quantity, Q*s, of soybeans?