Economics 2015 David D. Selover Macroeconomics Homework # 3: Demand and Supply Demand: Let the Market Demand curve for soybeans be given by the following equation: Q=100,00{]10,{]{}D P where Q = the quantity of soybeans in kilograms P = the price of soybeans in dollars per kilogram. Supply: Let the lvlarket Supply curve for soybeans be given by the equation: 1) 2) 3) 5) 7) Q:5,UU{}+5,UUDP Graph the Demand Curve on a sheet of paper. Be sure to label the axes. What is the slope of the Demand Curve? Is it positive or negative? 1iatihy? What is the intercept? Note that in order to calculate the geometrically correct intercept and slope you probably want to rewrite the equation so that P is expressed in terms of Q and then interpret the coefcients. Eguilibrimn: Graph the Demand and Supply curves together. Label all parts of the graph. Using algebra, solve for the equilibrium price and quantity of the soybeans. Consumer Sgggplus: The Consumer Surplus (CS) is the triangular area under the demand curve and above the equilibrium price. Solve for the consumer surplus at the equilibrium price and quantity. (Hint: Use the formula for the area of a triangle.) (See Chapter 4, p. 80.) Producer Spyplus: The Producer Surplus (P5) is the triangular area above the supply curve and below the equilibrium price. Solve for the producer surplus at equilibrium price and quantity. (Again, use the formula for the area of a triangle.) (See Chapter 4, p. 80.) Price Floor: Assume that the government creates price supports for soybeans in order to help the farmers. Assume that these price supports take the form of a price oor in which the government prohibits the price of soybeans from falling below $8. 00 per kilogram. Draw a diagram. What will be the quantity of soybeans supplied? What will be the quantity of soybeans demanded? What will be the result of this price oor? In what quantity? Price Cejljpg: Assume that the government creates price controls for soybeans in order to help the poor. Assume that these price controls take the form of a price ceiling in which the government prohibits the price of soybeans from rising above $5.00 per kilogram. Draw a diagram. What will be the quantity of soybeans supplied? What will be the quantity of soybeans demanded? What will be the result of this price ceiling? In what quantity? Law of Demand: A) Draw a graph and explain the Law of Demand. B} What other variables might affect demand and shift the demand curve
