Question

Each question is worth 5 points. To get all points you must properly label your diagrams and identify original and new equilibrium. 1. To generate voting support from those who live in dairy states (e.g., California, Wisconsin, etc.) Senator Amy Klobuchar argues that government needs to pass legislation that puts a price floor on milk and cheese. Using supply and demand models, show the effect that such a policy might have on the equilibrium price and quantity in: a. the milk market b. the cheese market c. the pizza market d. the cereal market

Answer 1

Price New Gullit supply Price Old Equilibrium Demand O QF QE quantity The price floor rains the price from Pe to "Price floor": This leads to a reduction in quantity nepplied from de to Be This also leads to a surplus quantity. Suppy . supply, 'Demand quantity of cheese The With the rire in the price of milk the supply curve mifte luftheards from supply 1 to nepply 2. And with an added price floors it increases the price to PF and this is also a reason for nuplus quantity

Supply, Price Demand nantity of Pizza As the price of input rines the supply cume shifts from Очее, а плееt , . Тали menares the price a from Po to P, and reduces the price from go to 8, . Price Quantity of cereal Cereal and milk are complementary goods. Ruse 6 иак илаил the demand for unal. decreases from Do to Do It reduces at the price and quantity dumamed.