As part of U.S. sugar policy (in 2013), the government offered to buy raw sugar from domestic sugarcane mills at an average price of 18.75 cents per pound. The government offer was made for as much raw sugar as sugar mills produced. Any raw sugar purchased by the government was not sold in the domestic market, as this might have caused raw sugar prices to fall. The price of 18.75 cents per pound was above the equilibrium price.
a. Under this policy, what do you think the government’s demand curve for sugar looks like?
b. What impact does this policy likely have on domestic sugar prices?