Suppose wheat is bought & sold in a competitive market. a) Below is the competitive market graph for wheat, with price in $/bushel and quantity in millions of bushels. Identify the equilibrium. (use the graph that is single attached as a photo) Now suppose that the government commits to buying 20M bushels of wheat, above and beyond the demand shown above. That commitment includes a promise to pay whatever equilibrium price happens with the additional purchase of 20M by the government. Part(b) are two ways to introduce and analyze the government’s purchase b) (a)One way to view the govt’s 20M is as extra demand above and beyond the market demand. Build this approach into the graph below left. (Use the quantity values on the graph - 0, 20, 40, 60, 80,100 – to help you get a reasonably accurate analysis.) Identify the new equilibrium P & Q (not as numbers, just position them on your graph).(b)A second way to view the govt’s 20M is as a reduction in the supply available to the original market customers. Build this approach into the graph below right. (Same note as above on using the quantity values on the graph to help with your analysis.) Identify the new equilibrium P & Q (not as numbers, just position them on your graph). c.)Are your results in parts (b) (i) and (ii)“economically” the same or different? Carefully explain
Suppose wheat is bought & sold in a competitive market.
a) Below is the competitive market graph for wheat, with
Now suppose that the government commits to buying 20M bushels of wheat, above and beyond the
Part(b) are two ways to introduce and analyze the government’s purchase
b) (a)One way to view the govt’s 20M is as extra demand above and beyond the market demand. Build this approach into the graph below left. (Use the quantity values on the graph - 0, 20, 40, 60, 80,100 – to help you get a reasonably accurate analysis.) Identify the new equilibrium P & Q (not as numbers, just position them on your graph).(b)A second way to view the govt’s 20M is as a reduction in the supply available to the original market customers. Build this approach into the graph below right. (Same note as above on using the quantity values on the graph to help with your analysis.) Identify the new equilibrium P & Q (not as numbers, just position them on your graph).
c.)Are your results in parts (b) (i) and (ii)“economically” the same or different? Carefully explain
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