Microeconomics 18th Edition by Campbell McConnell, Stanley Brue, Sean Flynn

Exercise 4

Use supply and demand curves to depict equilibrium price and output in a competitive market for some farm product. Then show how an above-equilibrium price floor (price support) would cause a surplus in this market. Demonstrate in your graph how government would reduce this surplus through a policy that (a) changes supply or (b) changes demand. Identify each of the following actual government policies as primarily affecting the supply of, or the demand for, a particular farm product: acreage allotments, food stamp program, Food-for-Peace program, a government buyout of diary herds, export promotion.