Price Floors and Consumer Surplus

question 9

Essay

Price Floors and Consumer Surplus. The U. S. wheat crop averages about 2 billion bushels per year, and is about 10 percent of the 20 billion-bushel foreign wheat crop. Typically, the market has a relatively good estimate of the wheat crop from the United States and Canada, but wheat crops from the Southern Hemisphere are much harder to predict. Argentina's wheat acreage varies dramatically from one year to another, for example, and Australia has hard-to-predict rainfall in key wheat production areas. To illustrate some of the cost in social welfare from agricultural price supports, assume the following market supply and demand conditions for wheat:
where Q is output in bushels of wheat (in millions), and P is the market price per bushel.

Distinguish between not-for-profit and for-profit agencies.

Understand the significance of using diagnostic criteria for program eligibility.

Learn about consumer-outcome criteria and its importance.

Identify key considerations in developing a policy proposal.

---

Definitions:

Unliquidated Debt

A debt for which the exact monetary value has not been determined.

Preexisting Duty

An obligation that a party is already legally bound to fulfill, which cannot serve as consideration for a new contract.

Accord and Satisfaction

A legal settlement where an agreement is made to discharge a claim by providing some form of compensation that differs from the original obligation.

Liquidated Debt

A debt for which the exact monetary value has been determined and acknowledged by both the debtor and the creditor.