ELASTICITYExercise 1:With reference to Fig 12, consider the following two farm-aid programs forwheat farmers.I. The government sets the price of wheat at P2 and purchases the resultingsurplus of wheat at P2.II. The government allows wheat to be sold at the equilibrium price of P1and grants each farmer a cash subsidy of P2-P1 on each unit sold. Whichof the two programs is more expensive to the government?Exercise 18:

Compare type of demand at poits A, B, and CEdA=dQA/dPA*(PA/QA)EdB=dQB/dPB*(PB/QB)EdC=dQC/dPC*(PC/QC)dQA/dPA=dQC/dPC=dQB/dPBPA>PB,PCPB=PCQA=QBEdCEdB>EdCEdA>EdBExercise 19:

Compare type of demand at poits A, B, and CP=a1+b1QP=a1+b2QP=100+-2*QAP=100+-1*QB

PQAQBEdAEdB0501000.000.0054895-0.05-0.05104590-0.11-0.11204080-0.25-0.25303570-0.43-0.43403060-0.67-0.67

Exercise 2:

Compare type of demand at poits A, B, and C

ACAC