Suppose the demand and supply for wheat are described by the following equations: QD = 10 — P; Qs = 2 + P, where P is the price in dollars, Q); is quantity demanded in millions of bushels per year, and Qs is quantity supplied in millions of bushels per year.
a. Solve for equilibrium price and quantity of wheat.
b. Would a government-set price of $5 create a surplus or a shortage of wheat? How much? Is $5 a price ceiling or a price floor?