What is a price support program in an agricultural market? Explain its impact on a market
What will be an ideal response?
A price support program is essentially a price floor in an agricultural market. The government typically:
• isolates the domestic market from global competition by restricting imports from the rest of the world;
• introduces a price floor, which in an agricultural market is called a "price support." The government guarantees to buy at this price;
• pays a subsidy to the farms by buying the surplus crop that is produced.
A price support leads to a decrease in the quantity consumed by private consumers. The government must buy the surplus crop produced. And a deadweight loss is created.
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As the interest rate falls, the quantity supplied of money falls and the quantity demanded of money rises
Indicate whether the statement is true or false
In a 2-good model, suppose that all individuals have tastes that are quasilinear in either good 1 or in good 2 (with some of each represented in the group.) The quasilinearity of everyone's tastes is then sufficient to insure that we can treat the group as if it were a single representative consumer.
Answer the following statement true (T) or false (F)