Suppose the market for corn is given by the following equations for supply and demand:
QS = 2p − 2
QD = 13 − p
where Q is the quantity in millions of bushels per year and p is the price.
Calculate the equilibrium price and quantity.
Sketch the supply and demand curves on a graph indicating the equilibrium quantity and price.
Calculate the price-elasticity of demand and supply at the equilibrium price/quantity.
The government judges the market price is under expectations and announces a price floor equal to $7 per bushel.
Would there be a surplus or a shortage?
What would be the quantity of excess supply or demand that results?
Use the graph to show you results.
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