question archive The annual harvest of feed corn occurs in October but demand is spread evenly throughout the year

The annual harvest of feed corn occurs in October but demand is spread evenly throughout the year

Subject:EconomicsPrice: Bought3

The annual harvest of feed corn occurs in October but demand is spread evenly throughout the year. Suppose monthly demand for feed corn has been estimated to be QDt = 90 - 3.2 Pt where QDt is the demand in month t and Pt is the price in month t. Monthly storage costs, which include a profit to cover the opportunity cost of tying up funds while storing, are estimated to be $0.10 per bushel per month. The price must rise every month to compensate for storage costs. So if the price is P in October, it must be P+$0.10 in November and then P+$0.20 in December and so on through the following September. Plugging the monthly prices into the monthly demand curves and then summing the monthly demand curves determine the annual demand. The Price in October, P, will be the only variable in the Demand function. Assuming corn is not stored beyond one year [or that the quantity of corn stored beyond one year is held constant] and imports and exports are not permitted, the annual demand must equal the annual supply. 

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