Suppose the demand function for corn is Qd = 10 2p, and supply function is Qs
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Question:
Suppose the demand function for corn is Qd = 10 − 2p, and supply function is Qs = 3p − 5. The government is concerned that the market equilibrium price of corn is too low and would like toimplement a price support policy to protect the farmers. By implementing the price support policy, the government sets a support price and purchases the extra supply at the support price. In this case, the government sets the support price ps = 4.
Calculate the original market equilibrium price and quantity in absence of the price support policy.
At the support price ps = 4, find the quantity supplied by the farmers, the quantity demanded by the market, and the quantity purchased by the government.
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