Question

Consider the following scenario: a government institutes a binding price floor on the market for milk....

Consider the following scenario: a government institutes a binding price floor on the market for milk.

  1. Draw two graphs:
    • one showing the market before the price floor is instituted; and
    • one showing the market after the price floor is instituted.
  2. In each graph label the following:
    • Market price and quantity
    • Consumer Surplus
    • Producer Surplus
    • Deadweight Loss (if relevant)
  3. Explain who is benefits from the price floor and who suffers.
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