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Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as follows

Suppose the total demand for wheat and the total supply of
wheat per month in the Kansas City grain market are as follows:
Page 6 of 10

Thousands Price Thousand Surplus (+)
of bushels per of bushel or
demanded bushels supplied shortage (-)


85 $3.40 72
80 3.70 73
75 4.00 75
70 4.30 77
65 4.60 79
60 4.90 81

a. What will be the market or equilibrium price? What is the equilibrium
quantity? Using the surplus-shortage column, explain why your answers are
correct.
b. Graph the demand for wheat and the supply of wheat. Be sure to label the
axes of your graph correctly. Label equilibrium price “P” and the equilibrium
quantity “Q.”
c. Why will $3.40 not be the equilibrium price in this market?
Why not $4.90? “Surpluses drive prices up; shortages drive them down.” Do
you agree?

Apr 12 2020 View more View Less

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