In 1998, the total demand for U.S. wheat was Q = 3244 − 283P and the domestic supply
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was QS = 1944 + 207P. At the end of 1998, both Brazil and Indonesia opened their wheat markets to U.S. farmers. Suppose that these new markets add 200 million bushels to U.S. wheat demand. What will be the free-market price of wheat and what quantity will be produced and sold by U.S. farmers?
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In 1998,
Qd = 3244 - 283P
After opening of the wheat market to US farmers the new demand curve is:
Qd'= (Qd+200) millions
Qd'= 3244-283P+200
Qd' = 3444-283P
Qs = 1944 + 207P
In equilibrium Qd = Qs
3444 - 283P = 1944 + 207P
3444-1944 = (207+283)P
1500/490=P
P = 3.06 units
Q = 3444-283*2.65
Q = 2578.02 units
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