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The wheat market is represented by the following demand-supply equations. QD =3550-266P
QS=1800 +240P
Where P is the price per bushel and Q is the quantity of wheat in millions.
1. The government believes that the market-clearing price is too low. To increase the price the government purchases 122 million bushels of wheat. This shifts the demand curve to the right. Write down the new demand equation.
1. Solve for the market equilibrium price and quantity.
2. Calculate the consumer surplus and the producer surplus after the government purchases.
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