Answer to Question #345272 in Microeconomics for ledi

Question

The market demand and supply functions for potatoes are: QD = 2,000 - 500P and QS = 800 + 100P. To help potato producers, the government is considering legislation that would put a price floor at R2.25 per bag. If this price floor is implemented, determine (i) how many bags of potatoes will the government be forced to buy to keep the price at R2.25; (ii) how much government will spend in total; and (iii) how much producer- and consumer -surplus changes

Answer 1

$Q_d=2000-500P,$

$Q_s=800+100P,$

$Q_d=Q_s,$

$P=2,$

$Q_d=Q_s=1000.$