Find the size of the farm surplus

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Reference no: EM131790744

Question: 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.

Reference no: EM131790744

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