a. Hatta Enterprises has developed a new product. The market demand for this product is given as follows:

QD = 240 - 4P

i. If the product is priced at $40, estimate the price elasticity of demand? Is demand elastic or inelastic? (10 marks)

ii. If the product price is increased slightly from $40, what will happen to the total expenditure on the product? (10 marks)

b. The wheat market is perfectly competitive and the market supply and demand curves are given by the following equations:

QD = 20,000,000 - 4,000,000P

QS = 7,000,000 + 2,500,000P,

where QD and QS are quantity demanded and quantity supplied measured in kilogram (kg), and P = price per kg.

i. Determine consumer surplus at the equilibrium price and quantity. (10 marks)

ii. Assume that the government has imposed a price floor at $2.25 per kg and agrees to buy any resulting excess supply. How many quantity (kg) of wheat will the government be forced to buy? Determine consumer surplus with the price floor. (10 marks)