The Market Demand and Supply Functions for Pork Are: Q_D

question 65

Essay

The market demand and supply functions for pork are: Q_D = 2,000 - 500P and Q_S = 800 + 100P. To help pork producers, the U.S. Congress is considering legislation that would put a price floor at $2.25 per unit. If this price floor is implemented, how many units of pork will the government be forced to buy to keep the price at $2.25? How much will the government spend in total? How much does producer surplus increase?

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Definitions:

Consumption

The act of using goods and services for personal needs or to satisfy consumer demands.

APS

Average Propensity to Save, the proportion of total income that is saved by the economy or an individual.

Consumption

Pertains to the aggregate volume of products and services that are purchased and consumed by families and people.

MPC

The marginal propensity to consume, which is the fraction of additional income that a household spends on consumption.