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    market supply and demand curves for agricultural products

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    2) Interpret this diagram as showing the market supply and demand curves for agricultural products. Suppose that supply increased from S0 to S1 and that demand is inelastic over the relevant range of prices. What areas in the figure would you use to illustrate the net change in farmers' total revenue as a result of the increase in supply?

    3) Again suppose that this diagram represents the market for agricultural products and that supply has increased from S0 to S1. To aid farmers, the federal government decides to stabilize the price at P0 by buying up surplus farm products.

    Show on the diagram how much this would cost the government. By how much would farm income change compared to what it would have been without government intervention?

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    Solution Summary

    This job assesses market supply and demand curves for agricultural products.