Maize is a product produced in a district called Adwensa. Producers in the area are able...

 

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Maize is a product produced in a district called Adwensa. Producers in the area are able to switch back and forth between maize and wheat production depending on market conditions. As a result the producers of contracted an economist to estimate the supply function for the producers using data from 30 producers: Q = -124 + 5.0P, – 2.5Px + 1.2R + 0.5T Where Q is the quantity supplied of maize in bags, P, is the average price of maize (e per bag), PL is the per unit price of capital, Ris the amount of rainfall (in inches) and Ty is the level of technology. In addition, the economist also estimated the demand function for maize as follows using data from 22 market centres in the district: Q = -120 – 3.0P + 1.25P, + 0.02M + 0.5A Where Qd is the quantity demanded of maize in bags, P, is the average price of maize (e per bag), Py is the average price of wheat (e per bag), M is per capita income and A is the amount of money spent on advertising. Now suppose the equilibrium values of the variables in the demand and supply functions are given as: P = ¢4; P, = ¢40; M = ¢75003; A = ¢20; Pg = ¢8; T = 100; and R = 20 inches i. %3D Estimate the demand and supply curves for maize ii. Determine the equilibrium price and quantity for maize. 111. Sketch the demand and supply curves and examine the welfares of the economic agents and hence find the total welfare of the society. Suppose the government imposes a tax of GH¢5 on every bag of maize sold, IV. determine the new equilibrium price and quantity. V. How would the producers and consumers share the tax per unit? vi. What is the government tax revenue? vii. Represent the demand curve, old and new supply curves and estimate the deadweight loss from tax. vii. What type of good is maize? 1X. What is the relationship between maize and wheat? Maize is a product produced in a district called Adwensa. Producers in the area are able to switch back and forth between maize and wheat production depending on market conditions. As a result the producers of contracted an economist to estimate the supply function for the producers using data from 30 producers: Q = -124 + 5.0P, – 2.5Px + 1.2R + 0.5T Where Q is the quantity supplied of maize in bags, P, is the average price of maize (e per bag), PL is the per unit price of capital, Ris the amount of rainfall (in inches) and Ty is the level of technology. In addition, the economist also estimated the demand function for maize as follows using data from 22 market centres in the district: Q = -120 – 3.0P + 1.25P, + 0.02M + 0.5A Where Qd is the quantity demanded of maize in bags, P, is the average price of maize (e per bag), Py is the average price of wheat (e per bag), M is per capita income and A is the amount of money spent on advertising. Now suppose the equilibrium values of the variables in the demand and supply functions are given as: P = ¢4; P, = ¢40; M = ¢75003; A = ¢20; Pg = ¢8; T = 100; and R = 20 inches i. %3D Estimate the demand and supply curves for maize ii. Determine the equilibrium price and quantity for maize. 111. Sketch the demand and supply curves and examine the welfares of the economic agents and hence find the total welfare of the society. Suppose the government imposes a tax of GH¢5 on every bag of maize sold, IV. determine the new equilibrium price and quantity. V. How would the producers and consumers share the tax per unit? vi. What is the government tax revenue? vii. Represent the demand curve, old and new supply curves and estimate the deadweight loss from tax. vii. What type of good is maize? 1X. What is the relationship between maize and wheat?

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Solution To Questions Answer i Demand Curve Q d x 120 3P x 125P y 002M 05A Supply Curve Q s x 124 5P ... View the full answer