Question
The supply of wheat is given by the following equation:Q w S = -6 + 4 P w - 2 P c - P f
The supply of wheat is given by the following equation:QwS = -6 + 4 Pw- 2 Pc - Pfwhere QwS is the quantity of wheat supplied; Pw in the price of wheat per bushel; Pc is the price of corn per bushel; and Pf is the price of tractor fuel per gallon.
a. Graph the inverse supply curve when corn sells for $4 a bushel and fuel sells for $2 a gallon. What is the supply choke price?
b. How much wheat will be supplied at a price of $4? $8?
c. What will happen to the supply of wheat if the price of corn increases to $6 per bushel? Explain intuitively, then graph the new inverse supply curve carefully and indicate the new choke price.
d. Suppose instead that the price of corn remains $4, but the price of fuel decreases by $1. What will happen to the supply of wheat as a result? Explain intuitively, then graph the new inverse supply. Be sure to indicate the new choke price.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started