posted by Kathy on .
The invention of a machine that increases milk production is discovered. If farmers were to decry the effect of this new technology on the price of milk and lobby government to set the price of milk at the price before the invention, what would be the result?
Excess demand for milk.
Excess supply of milk.
Neither a shortage nor a surplus.
A decline in the price of milk.
Draw a supply and demand graphs for milk. Now increase supply due to the new techonolgy. Now put a price floor equal to the original equalibrium price. What is quantity demanded at this price? What is quantity supplied?
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