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Demand and supply in the wheat market are given by:
QD = 2,000 - 1,000 P
QS = -500 + 1,000 P
where Q is millions of bushels and P is price per bushel.
(a) Find the equilibrium price and quantity.
(b) Plot the supply and demand curves.
(c) Suppose that the government wishes to support farm income and thus sets a price floor of $1.50/bushel. Find the size of the farm surplus. Demonstrate your answer over the graph.
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