Linear equation going through two quantity-price combination

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Suppose that the demand for corn is such that Q = 14 billion bu are consumed if the price is P = $4.00/bu, and Q = 16 billion bu are consumed if the price is P = $3.00/bu. a. Assuming that the corn demand can be represented by a linear equation going through these two quantity-price combinations, calculate such equation. (Hint: Demand is P = a + b Q, and you need to calculate “a” and “b”.) b. Use a computer spreadsheet (e.g., Excel) to graph the demand curve you obtained in (a) above, plotting Q on the horizontal axis and P on the vertical axis. c. Using the two quantity-price combinations reported in (1) above, compute the own-price elasticity of demand for corn. Is the corn demand elastic or inelastic? d. Calculate the corn expenditures by consumers when the price is $3.50/bu. Based on (c) above, an increase in corn price from $3.50/bu to $4.00/bu would result in a larger or a smaller amount spent by consumers to buy corn.

Reference no: EM131242394

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