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Equilibrium Price of Wheat

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1. If the demand curve for wheat in the United States is P = 12.4 - QD
where P is the farm price of wheat (in dollars per bushel) and QD is the quantity of wheat demanded (in billions of bushels), and the supply curve for wheat in the United States is P = -2.6 + 2QS where QS is the quantity of wheat supplied (in billions of bushels), what is the equilibrium price of wheat? What is the equilibrium quantity of wheat sold? Must the actual price equal the equilibrium price? Why or why not?

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Solution Summary

This solution shows a sample calculation of the equilibrium price and quantity of wheat when the supply and demand curves are known. It then evaluates a management decision based on the price elasticity of demand of a firm's product.

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1. At equilibrium, Qd = Qs
12.4 - Q = -2.6 + 2Q
12.4 + 2.6 = 3Q
15 = 3Q
Q = 5

P = 12.4 - Q
P = 7.4

The actual ...

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