Question

2. The following table contains information about the wheat market:

Price per Bushel (dollars)	Quantity Demanded (bushels)	Quantity Supplied (bushels)
$2	40,000	0
4	34,000	4,000
6	28,000	8,000
8	24,000	16,000
10	20,000	20,000
12	18,000	28,000
14	12,000	36,000
16	6,000	40,000

Draw and label a graph representing this market (demand curve, supply curve, etc.) What is the market price of wheat in this market, and what is the total revenue to farmers at that price? If the farmers then band together and set a price floor of $14 per bushel, what will their total revenue be? Label these two revenue areas on your graph.

3. For each of the below, indicate if the curve in question would shift to the left, to the right, or not at all. Assume perfect competition, and that other than the change listed everything else remains the same (i.e. ceteris paribus).

• How would the DEMAND CURVE shift if there was…

1. An increase in income and the good is a normal good
2. A decrease in the price of a substitute good
3. A decrease in population
4. An increase in the taste for the good
5. A decrease in the price of a complimentary good

• How would the SUPPLY CURVE shift if there was…

1. A decrease in the number of firms in the market
2. A decrease in the current price of the product
3. An increase in productivity
4. A decrease in the expected future price of a product
5. An increase in the price of an input

4. Demand is highest for watermelon in the summer, yet that is also when prices are lowest. Draw a graph showing both demand and supply for watermelon in both the summer and the winter (i.e. two demand curves and two supply curves on one graph) that illustrates how this situation could be possible.

Answer 1

(Question 1)

(i)

Graph of Demand and supply curves is shown below, where Demand & Supply intersect at point A with equilibrium price P0 and equilibrium quantity Q0.

(ii)

At equilibrium point A,

Price = $10

Quantity = 20,000

Total Revenue = P x Q = Area of rectangle 0P0AQ0 = $10 x 20,000 = $200,000

(iii)

At floor price (Pf) of $14,

Quantity demanded (QD) = 12,000

Quantity supplied (QS) = 36,000

Producers will be able to sell only the quantity that consumers will demand, so market quantity traded is QD = 12,000.

Total Revenue = Area of rectangle 0PfBQD = $14 x 12,000 = $168,000

​​​​​​​NOTE: As per Chegg Answering Policy, 1st question is answered.