Question: Consider the market for soybeans in Smallia. The market demand is given as P = 1000 – 2Q while the market supply is given as P = 200 + 6Q. Assume that the market for soybeans in Smallia is closed to international trade. For each of the following questions please show your work and not just your final answer.
a. Given the above information, what is the equilibrium price and equilibrium quantity in this market?
b. What is the value of consumer surplus in this market given the above information?
c. What is the value of producer surplus in this market given the above information?
Now suppose that the government of Smallia implements a price floor in the market for soybeans and this price floor is set at $500 per unit of soybeans.
d. Describe the impact of this price floor on the market for soybeans and in your answer explain why this is the impact.
The government decides to institute a price ceiling in this market for soybeans instead of the price floor. The government sets this price ceiling at $400.
e. Describe verbally (no numbers needed here) the impact of this price ceiling on the market for soybeans and in your answer explain why this is the impact.
f. Now determine how many units of soybeans will actually be traded in this market given this price ceiling.
g. What is the value of consumer surplus given this price ceiling?
h. What is the value of producer surplus given this price ceiling?