Consider the perfectly competitive market for an agricultural commodity. The direct market demand curve is Q(P) = 720 − 15P and the direct market supply curve is Q (P) = 15P. The market equilibrium quantity is 360 units at a price of $24. Suppose the government imposes a price floor at P = $36.00 and uses a deficiency payment program to implement the floor. What quantity will be sold and what prices will consumers and producers face under this policy? The new equilibrium quantity is 540 units. Consumers pay $12 and the producers receive $36. Find the: a. Change in consumer surplus and producer surplus. b. Government Expenditure. c. Change in social surplus.
Consider the perfectly competitive market for an agricultural commodity. The direct market demand curve is Q(P) = 720 − 15P and the direct market supply curve is Q (P) = 15P. The market equilibrium quantity is 360 units at a price of $24. Suppose the government imposes a price floor at P = $36.00 and uses a deficiency payment program to implement the floor. What quantity will be sold and what prices will consumers and producers face under this policy? The new equilibrium quantity is 540 units. Consumers pay $12 and the producers receive $36. Find the: a. Change in consumer surplus and producer surplus. b. Government Expenditure. c. Change in social surplus.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the
The
Suppose the government imposes a
The new equilibrium quantity is 540 units. Consumers pay $12 and the producers receive $36.
Find the:
a. Change in
b. Government Expenditure.
c. Change in social surplus.
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