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The wheat market is perfectly competitive, and the market supply and demand curves are given by the following equations:
   QD = 20,000,000 - 4,000,000P
   QS = 7,000,000 + 2,500,000P,        
where QD and QS are quantity demanded and quantity supplied measured in bushels, and P = price per bushel.

a.   Determine consumer surplus at the equilibrium price and quantity.
b.   Assume that the government has imposed a price floor at $2.25 per bushel and agrees to buy any resulting excess supply.  How many bushels of wheat will the government be forced to buy?  Determine consumer surplus with the price floor.
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Microeconomics

Microeconomics


Edition: 8th
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