domestic demand was Qp=1700-107P.Domestic supply was Qs=1944+207P. Suppose the export demand for wheat falls by 40 percent. 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 the farmers have much reason to worry? Given total demand,Q=3244.283P,and domestic demand,Q=1700 107P,we may subtract and determine export demand.Q=1544-176P. The initial market equilibrium price is found by setting total demand equal to supply: 3244.283P=1944+207P.0r P=$2.65. The best way to handle the 40 percent drop inexport demand is toassume that the export dema and curve pivots down and to the left around the vertical intercept so that at all prices demand decreases by 40 percent,and the reservation price(the maximum price that the foreign country is willing to pay)does not change.If you instead shifted the demand curve down to the left in a parallel fashion the effect on price and quantity will be qualitatively theme but will The export demand is 0.6Q=0.6(1544-176P)=926.4-105.6P Graphically,export demand has pivoted inwards as illustrated in figure 2.5a below. Total demand becomes Qo=Q4+0.6Q。=1700.107P+926.4105.6P=2626.4-212.6P 8.77 Q。 926.4 1544 Figure2.5adomestic demand was QD = 1700 - 107P. 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 the farmers have much reason to worry? Given total demand, Q = 3244 - 283P, and domestic demand, Qd = 1700 - 107P, we may subtract and determine export demand, Qe = 1544 - 176P. The initial market equilibrium price is found by setting total demand equal to supply: 3244 - 283P = 1944 + 207P, or P = $2.65. The best way to handle the 40 percent drop in export demand is to assume that the export demand curve pivots down and to the left around the vertical intercept so that at all prices demand decreases by 40 percent, and the reservation price (the maximum price that the foreign country is willing to pay) does not change. If you instead shifted the demand curve down to the left in a parallel fashion the effect on price and quantity will be qualitatively the same, but will differ quantitatively. The new export demand is 0.6Qe=0.6(1544-176P)=926.4-105.6P. Graphically, export demand has pivoted inwards as illustrated in figure 2.5a below. Total demand becomes QD = Qd + 0.6Qe = 1700 - 107P + 926.4-105.6P = 2626.4 - 212.6P. Qe 926.4 1544 8.77 P Figure 2.5a