Suppose that the demand function and supply function for corn are: Qd = 100 − 4Pcorn Qs = 2Pcorn − 17 (a) What is the equilibrium price of corn? What is the amount of corn bought and sold?

Econ 360

#1.

Suppose that the demand function and supply function for corn are:

Qd = 100 − 4Pcorn

Qs = 2Pcorn − 17

(a) What is the equilibrium price of corn? What is the amount of corn bought and sold?

(b)    What is the total consumer surplus, producer surplus and aggregate surplus at the equilibrium price/output?

(c) Graph the supply & demand and illustrate the consumer & producer surplus.

(d) Suppose that the government put a limit on total corn production to 20. What is the deadweight loss from producing at 20 vs. the equilibrium quantity?

#2.

For this problem, please read the WSJ articles, “Mortgage Rates Hit 7.23%, Highest Since 2001” and U.S. Home Sales Fell in July, Extending Prolonged Slump.1 Please answer the below questions based on the information provided in the articles.

a) How does increase in mortgage rates (interest rates) affect the demand for houses?

b)    How does increase in mortgage rates (interest rates) affect the supply of existing houses for sale?

c) Graph the impact of increase in mortgage rates on the demand & supply of existing homes for sale. Point out what happened to the equilibrium quantity and price according to the articles.