Download Market Supply and Demand: The quantity of wheat, in billions of

Market Supply and Demand:
The quantity of wheat, in billions of bushels, that wheat suppliers are willing / able to produce in
a year and offer for sale is called the quantity supplied, and is denoted by S ("supply"). The
quantity supplied is determined by the price for which wheat will sell, P, in dollars per bushel.
For a certain year, the relationship between P and S is correctly described by
W œœ Þ%'*T b Þ$&#.
The quantity of wheat, in billions of bushels, that wheat consumers are willing to buy in a year is
called the quantity demanded, and will be denoted by D ("demand"). The quantity demanded is
also determined by the price for wheat, P, in dollars per bushel. For the same year as above, the
relationship between P and D is described by the equation
H œœ %Þ)") c "Þ)")T .
(a) Interpret the meaning of the ".352" in the equation that describes the connection between the
price for a bushel of wheat, P, in dollars, and the amount that producers are willing/able to
provide for sale in a year, S, in millions of bushels. Be exact and consise, but not
unnecessarily short.
(b) Interpret the fact that the equation involving "D" and "P" has a minus sign in the specific
spot at which it occurs. Why does that make sense?
(c) Interpret the fact that there is a "1.818" in front of P in the equation which describes the
connection between peice P, in dollars per bushel, and the amount demanded by consumers,
D, in millions of bushels. Be exact and consise, but not unnecessarily short.
At the so-called equilibrium price, the quantity supplied and the quantity demanded are the
same. Economic theories say that under ideal conditions, the equilibrium price will be the market
price. This is because producers will increase production if the price is higher, and consumer
demand increases if the price is lower. So, if the price P is higher than the equilibrium price, then
there is excess supply (more is produced and offered than what is demanded by consumers), and
the price has the tendency to drop. If the price P is lower than the equilibrium price, then the
demand is higher (price is low!) than what is supplied (it's not worth producing if it is not worth
much), and the price rises!
(d) Find the equilibrium price for the market conditions expressed in the above equations.
Show your work. Explain, in words, the rationale for what you did calculationally.
(e) In the textbook (p.300, #8) the equations are stated as:
T œœ #Þ"$W c !Þ(&
T œœ #Þ'& c !Þ&&H.
(i) Verify that the equations I provided earlier are very much the same (except for rounding.)
(ii) Which of the two versions of the two equations better conform with our ideas about input
and output? Explain in a few words.
(iii) Which of the two versions of the two equations make more sense to you? Why?
(Or is there no difference to you?)
(iv) Why do you think the textbook authors gave the equations as written in (e)?