I need the answers for A,B,C & D with logical, written out answerd please. By Up
ID: 1151208 • Letter: I
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I need the answers for A,B,C & D with logical, written out answerd please.
By Upload Assignment: Graded Hi Microsoft Word-aleuzenev ewercis × I Need Answers To A, B & C wiX 2) Kemyan coffee prowers have × ? https://blackboard viccnet.edu/bbcs webdav/pid-4030696-dt-content-rid-26993379_1/institution/CITL/Humanities Social an ? 2 of 6 - + Automatic Zoom KSh/lb 2) Kenyan coffee growers have had a tough time of late. Competition from other producers has driven down the price of coffee beans in Kenya itself. To protect Kenyan farmers, the agricultural ministry has decided to establish a minimum price of 400 KSh/pound. ($1 is approximately equal to 96 Kenyan Schillings (KSh).) Kenya's market for Kenyan coffee beans is illustrated to the right. 700 600 500 400 300 200 100 Millions of pounds/yr 2 4 6810 a) Does this 400 KSh price constitute a price floor or ceiling? Is it "effective" in this instance? How do you know? b) Given the market conditions in the graph, would a price of 400 KSh produce a shortage or surplus, and how large will this shortage or surplus be? 558 3Explanation / Answer
a. A minimum price of 400 KSh per pound means Price Floor because this price is above the market equilibrium price of coffee that is 300 KSh per pound.
Here the price floor is set above the market equilibrium hence it is effective. If it might have been set below the equilibrium price, price floor may have been irrelevant.
b. Due to the Price Floor a Surplus would be there in the market of coffee. This happens because at this price consumers are ready to buy only 5 tonnes per year but suppliers are supplying 10 tonnes per year. (QS > QD)
Surplus = 10 - 5 = 5 tonnes per year.
c. Price Floor disadvantage
Large surplus might be their. Suppliers will be supplying more quantity at price floor but demand is less than the supply. Hence, their are chances that the surplus might get wasted.
d.
i. The government can restrict the output level Due to this the supply curve will shift to its left. This shift will increase the price of coffee.
ii. The government can subsidize the coffee. Due to this subsidy the consumers will be demanding more thus the demand curve will shift to its right. Hence shifting the equilibrium point.