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Question: a closed economy 10 pointsandnbspthe demand and the supply...

Question details

A - Closed Economy (10 points):

 

The demand and the supply for broccoli[1] in Veganstan’s closed economy are given by

 

QD = 60 – 2P, and

QS = 38P.

 

We assume the market is perfectly competitive.

 

1: Compute the closed economy equilibrium price PCE and quantity QCE.                         

2: Plot on a graph: the demand, the supply, and the equilibrium price and quantity.           

3: Using the demand and supply graph/diagram, analyse the impact on the equilibrium price and quantity, under each one of the following scenarios:

a)     a hailstorm damages the crop;                                                                          

b)     a new type of manure becomes available, which increases the yield per acre;     

c)     a hailstorm damages the crop while at the same time a new type of manure becomes available.



[1] Both demand and supply are expressed in kilograms (kg), and all prices are in dollars ($).

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