.Consider the following table:

Price per bushel (in $)

Quantity Demanded (bushels)

Quantity Supplied (bushels)

2

40,000

0

4

36,000

4,000

6

30,000

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

a)The table contains information about the wheat market. Use the table to answer the following questions.

b)What are the equilibrium price and quantity of wheat?

Answer

c)Suppose the prevailing price is US$6 per bushel. Is there a shortage or a surplus in the market?

Answer

d)What is the quantity of the shortage or surplus?

Answer

e)How many bushels will be sold if the market price is US$6 per bushel?

Answer

f)If the market price is US$6 per bushel, what must happen to restore equilibrium in the market?

Answer

g)At what price will suppliers be able to sell 36,000 bushels of wheat?

Answer:

h)Suppose the market price is US$14 per bushel. Is there a shortage or a surplus in the market?

Answer

i)What is the quantity of the shortage or surplus?

Answer

j)How many bushels will be sold if the market price is US$14 per bushel?

Answer

k)If the market price is US$14 per bushel, what must happen to restore equilibrium in the market?

Answer

2.According to the Australian Wool Innovation, severe drought conditions in Australia contributed to the lowest level of wool production in 50 years. This record low production has driven up prices sharply in Australian wool markets. Meanwhile, the price of raw cotton increased significantly for the first time in many years.

a)Illustrate this observation with one demand and supply graph for the market for Australian wool and another demand and supply graph for raw cotton.

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b)Make sure that your graphs clearly show (1) the initial equilibrium before the decrease in the supply of Australian wool and (2) the final equilibrium.

Answer

c)Use arrows to indicate any shifts in the demand and supply curves for each market.

Answer

3.Consider the market for some product X that is represented in the demand-and-supply diagram.

a)Suppose the government decides to impose a price floor at P1. Describe how this affects price, quantity and market efficiency.

b)Suppose the government decides to impose a price floor at P2. Describe how this affects price, quantity and market efficiency.

c)Suppose the government decides to impose a price ceiling at P1. Describe how this affects price, quantity and market efficiency.

d)Suppose the government decides to impose a price ceiling at P2. Describe how this affects price, quantity and market efficiency.