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# Markets and government intervention

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Answer these questions. Simple concise straightforward answers are more than enough.3 Markets and government intervention Total demand for U.S. wheat (FYI: quantity is in millions of bushels and price in dollars)is DT (P) = 3000  50?. Total demand for wheat is the aggregate of domestic demand andforeign demand for wheat. Foreign demand is DF(P) = 1000  20?. Domestic demand isDD(P) = 2000  3UP. Supply of US. wheat is 5(P) = 2000 + 10019 (a) Compute the market price for US. Wheat. (b) Imagine that (at any price) foreign demand for U.S. Wheat drops by 40%. What is the new foreign demand as a function of prices? Compute the new market price for wheat. Do American farmers have to worry about foreign markets? Given the drop in foreign demand, the government wants to raise prices arti?cially back to the level of question (a) by buying wheat. (c) Given that the government demands a ?xed quantity Dg, compute total demand for wheat as a function of P and D9. (d) Given a government demand D3, compute the market price for wheat as a function of Dg. (e) What is the value DG such that the equilibrium price of wheat is the same asthat in question (a)? How much does the government have to spend on wheat?

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