Consider the market for milk in Saskatchewan. If p is the price of milk (cents per litre)
Question:
Demand: p = 225 – 15QD
Supply: p = 25 + 35QS
a. Assuming there is no government intervention in this market, what is the equilibrium price and quantity?
b. Now suppose the government guarantees milk producers a price of $2 per litre and promises to buy any amount of milk that the producers cannot sell. What are the quantity demanded and quantity supplied at this guaranteed price?
c. How much milk would the government be buying (per month) with this system of price supports?
d. Who pays for the milk that the government buys? Who is helped by this policy and who is harmed?
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a The freemarket outcome is determined where quantity demanded equals quantity supplied QD QS Settin...View the full answer
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Related Book For 
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
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