The price of corn rises. Corn is used to feed cattle. The price of fish falls (consumers consider fish a substitute for beef)

So how does this change affect the demand and supply curve? And the equilibrium price and quantity?

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Hubert KochLv2

28 Jul 2018

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43) The demand for corn increases. As a result, the price of corn , and the less elastic the supply of corn, the will be the effect on the price. A) falls; greater B) rises: smaller C) rises; greater D) falls; smaller E) None of the above because the change in the price is effected by the price elasticity of demand.

For the last 70 years, the U.S. government has used price supports to provide income assistance to American farmers. At times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying figure.

Price of corn quantity of corn (bushels)
Per bushel demand supply
$5 800 1200
4
3 1000 1000
2
1 1200 800
0

a. If the government sets a price floor of $5 per bushel, what does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are produced by the farmer? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government and at what price? How much does the program cost the government? How much revenue do corn farmers receive?

b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels What does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government, if any? How much does the government pay the farmer and at what price? How much revenue do corn farmers receive?

c. Which of these programs (in parts a and b) costs corn consumers more? Explain.
Which program costs the government more? Explain. What are the inefficiencies that arise in each of these cases (parts a and)?

periwinklebear959

5. For the last 70 years the U.S. government has used price supports to provide income assistance to American farmers. At times the government has used price floors, which it maintains by buying up the surplus farm products. At other times, it has used target prices, a policy by which the government gives the farmer an amount equal to the difference between the market price and the target price for each unit sold. Consider the market for corn depicted in the accompanying figure.

Price of corn quantity of corn (bushels) Per bushel demand supply
$5 800 1200
4
3 1000 1000
2
1 1200 800
0

a. If the government sets a price floor of $5 per bushel, what does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are produced by the farmer? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government and at what price? How much does the program cost the government? How much revenue do corn farmers receive? (10points)

b. Suppose the government sets a target price of $5 per bushel for any quantity supplied up to 1,000 bushels What does that mean and how will it affect supply and demand (illustrate on the supply and demand curve below)? How many bushels of corn are purchased by consumers and at what price? How many bushels of corn are purchased by the government, if any? How much does the government pay the farmer and at what price? How much revenue do corn farmers receive? (10 points)

c. Which of these programs (in parts a and b) costs corn consumers more? Explain.
Which program costs the government more? Explain. What are the inefficiencies that arise in each of these cases (parts a and b)? (20 points)