MICROECONOMICS
MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
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Chapter 5, Problem 5QE

(a)

To determine

Impact of decreased supply and increased demand.

(b)

To determine

Impact of increase in supply and constant demand.

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India produces wheat that it consumes domestically and exports to Sri Lanka. Sri Lanka doesn’t produce any wheat and is totally dependent on India. The total demand of wheat is given by Q = 3244 -283P. The domestic demand of India is given by the equation Qd = 1700-107P. The total supply of wheat is given by equationQs= 1944 + 207P.(P is in Rs per Kg and Q is in lakh Kg.) a.Calculate the market price of wheat. C.Suppose the export demand for wheat falls by 40 percent, will the market price change? If yes, then what is the newmarketprice?
Much of the demand for U.S. agricultural output has come from other countries. In 1998, the total demand for wheat was Q = 3244 - 283P. Of this, total domestic demand was QD = 1700 - 107P, and domestic supply was QS =1944 + 207P. Suppose the export demand for wheat falls by 40%. a. U.S. farmers are concerned about this drop in export demand. What happens to the free-market price of wheat in the United States? Do farmers have much reason to worry? b. Now suppose the U.S. government wants to buy enough wheat to raise the price to $3.50 per bushel. With the drop in export demand, how much wheat would the government have to buy? How much would this cost the government?
With the recent war between Russia and Ukraine, the production and thus exports of wheat have declined (which increased the price of such exports), because Ukraine is the major producer and exporter of the same. As a result, what can we expect in the market for rice, used by many as a staple instead of wheat? a) The equilibrium price will increase, the equilibrium quantity will decrease b) The equilibrium price will increase, the equilibrium quantity will increase c) The equilibrium price will decrease, the equilibrium quantity will increase d) The equilibrium price will decrease, the equilibrium quantity will decrease
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