1. The Department of Agriculture is interested in analyzing the domestic market for corn.The DA's staff economists estimate the following equations for the demand and supply curves:

Qd= 1,600 - 125P

Qs= 440 + 165P

Quantities are measured in millions of bushels; prices are measured in dollars per bushel.

a)Calculate the equilibrium price and quantity that will prevail under a completely free market.

b)Calculate the price elasticities of supply and demand at the equilibrium values. Is demand elastic, inelastic or unit elastic and why?Is supply elastic, inelastic or unit elastic and why?

c)The government currently has a $4.50 bushel support price in place.What impact (surplus or shortage) will this support price have on the market?If the government is currently implementing a program that requires it to buy up any surpluses, how much wheat will the government buy?