QUESTION 1 The inverse demand for corn in Canada is given by: P = 18 - 2Q D the

ID: 1187177 • Letter: Q

Question

QUESTION 1

The inverse demand for corn in Canada is given by:

P = 18 - 2QD the corresponding supply of corn in Canada is given by:

, and

P = 4QS QD : Quantity demanded for corn (Kg); and

QS : Quantity supplied of corn (Kg).

Where:
P : Price of corn ($/Kg);

Determine equilibrium price and quantity;

Assume the Government decided to impose a price Ceiling of $6, how much

of corn would be demanded and how much of corn would be supplied?

Assume the Government decided to impose a price floor of $14, how much of

corn would be demanded and how much of corn would be supplied?

In case of Equilibrium price and quantity,

Qd=Qs

(18-P)/2=P/4

P=12

Hence Equilibrium price=$ 12

Put P=$12 in Qs=P/4

Qs=12/4

=3 units

Hence Equilibrium quantity= 3 units

In case of price Ceiling of $6

Demand of corn (Qd) =(18-P)/2=(18-6)/2=12/2=6 units

Supply of corn (Qs) = P/4=6/4=1.5 units

In case of price Floor of $14

Demand of corn (Qd) =(18-P)/2=(18-14)/2=4/2=2 units

Supply of corn (Qs) = P/4=14/4=3.5 units

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