I need help with specifically H, I and J 1.a. In green pen, graphically show the
ID: 1142229 • Letter: I
Question
I need help with specifically H, I and J
1.a. In green pen, graphically show the market for milk. Label supply and demand and the equilibrium price and quantity. Demand shows the price consumers are __________ ___ ______ for a given quantity and Supply shows the price producers are __________ ____ ________ for a given quantity.
b. In black pen, draw diagonal lines to shade in the consumer surplus. Discuss what it means.
c. In red pen, draw diagonal lines to shade in the producer surplus. Discuss what it means.
d. In blue pen, show a price floor on milk. Label the resulting Qd and Qs and show the amount of shortage or surplus that exists at the price floor. Explain why the disequilibrium occurs.
e. In black pen, draw diagonal lines in the opposite direction of those in b. to show the new consumer surplus
. f. In red pen, draw diagonal lines in the opposite direction of those in c. to show the new producer surplus.
g. In blue pen, darkly outline the inefficiency that results from the price floor on milk.
h. Who gains and who loses from the price floor?
i. Overall, is society better or worse off (from a total gain perspective) with the price floor? Given this answer, what are some reasons why the price floor may be implemented. Think about the number of winners and losers from the program, how much each one gains or loses, and their incentive to lobby for it.
j. Given what you know about price floors now, would you vote for or against a price floor on milk? Why?
Explanation / Answer
H.Price floor is the minimum price that a producer will receive.It is binding if it is set above the equilibrium price.
A binding price floor raises price of a commodity.
Producers gain because they receive higher price for their goods and consumers loose because they have to pay higher price.
Producer's surplus rises and Consumer's surplus falls.
I.Society is worse off because a price floor creates a dead weight loss and excess supply of goods.
Price floor can be implimimple for goods such as agricultural goods because the farmers generally receive a much lower price for their goods.Sometimes the market price does not even cover the cost of production.So,the government offered a minimum support price for agricultural goods.
Winners and loosers have been discussed in H.Only producers have incentive to lobby for it because their overall profit rises.
J.I would vote against it because it creates an overall loss.However, I'll consider the exception of agricultural goods.