Much of the demand for U.S. agricultural output has come from other countries. In 1998, the total demand for wheat was Q=3244-283P. Of this, total domestic demand was Qd=1700-107P, and domestic supply was Qs=1944+207P. Suppose the export demand for wheat falls by 40 percent.
a. U.S. farmers are concerned about this drop in export demand. What happens to the free-market price of wheat in the United States? Do farmers have much reason to worry?
b. Now suppose the U.S government wants to buy enough wheat to raise the price to $3.50 per bushel. With the drop in export demand, how much wheat would the government have to buy? How much would this cost the government? Please do this step by step so I can understand how to solve this.
Exports refers to that amount of goods or services that are being produced in one country but sold in another. These help to generate income in the domestic country but creating more inflow of capital in the economy. An economy benefits when its exports are more than its imports.
Answer and Explanation:
The export demand for wheat is the difference between the total demand and the total domestic demand. So, the export demand (QE) is:
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fromChapter 14 / Lesson 9
Exports are goods or services manufactured in one country and sent to another to be sold to consumers. Learn how to define an export, explore the role of customs and free trade, and discover examples of popular exports such as vehicles and electronics.