A Price Support on Wheat. The inverse demand and supply curves for wheat are given by: P = 11 - Q^d and P = 1 + Q^s, where P is the price of wheat in dollars per bushel (USD/bu) and Q is the quantity of wheat in million bushels (mil bu). The price support set by the government is equal to $8/bu.
A. Explain the purpose of this policy: what is it intended to do?
B. Calculate the equilibrium price and quantity of wheat in free markets.
C. Calculate Q^s and Q^d under the price ceiling.
D. Who is helped and who is hurt by this policy?

Question

Quizplus · Accepted Answer

The Answer of A Price Support on Wheat. The inverse demand and supply curves for wheat are given by: P = 11 - Q^d and P = 1 + Q^s, where P is the price of wheat in dollars per bushel (USD/bu) and Q is the quantity of wheat in million bushels (mil bu). The price support set by the government is equal to $8/bu. A. Explain the purpose of this policy: what is it intended to do? B. Calculate the equilibrium price and quantity of wheat in free markets. C. Calculate Q^s and Q^d under the price ceiling. D. Who is helped and who is hurt by this policy?