Suppose that the demand curve for wheat is Q= 100-10P and the supply curve is Q=10P. The government imposes a price support at Ps= 6 using a deficiency program.

1.What is the quantity supplied and the priced cleared by the market, and the deficiency payment?

2.Graph you answers by showing the different surpluses and the effects of the program.

3.Calculate the change in Consumer and producer surpluses, welfare and dead weight loss.

4.Discuss the overall benefits of imposing such a program on the market.

Take a shot. Draw supply and demand curves. Impose a price support (What are the details of a "deficiency program"?) On your graph, you should see changes in producer and consumer surpluses.

I drew the graph, found CS,PS and DWL, however, how do you find the price cleared by market and deficiency payment? is the the producer surplus x 6$ (by gov)?

price support (deficiency program) of 6$ means that the gov will buy all production of 6$ if not sold through the market.

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To find the quantity supplied and price cleared by the market, we need to determine the equilibrium point where the demand and supply curves intersect. In this case, the demand curve is Q = 100 - 10P and the supply curve is Q = 10P.

To find the equilibrium quantity, we can set the quantity demanded equal to the quantity supplied:

100 - 10P = 10P

Solving for P, we get:

20P = 100

P = 5

Now we can substitute the equilibrium price (P = 5) back into either the demand or supply equation to find the equilibrium quantity. Let's use the supply equation:

Q = 10P
Q = 10(5)
Q = 50

So, the quantity supplied and the price cleared by the market in the absence of the deficiency program are Q = 50 and P = 5.

Now, let's determine the deficiency payment. A price support of Ps = 6 means that the government is willing to buy wheat at a price of 6 if the market price is lower than that. In this case, since the market price is lower (P = 5), the government will intervene and purchase any excess supply at the price of 6.

To calculate the deficiency payment, we need to find the difference between the market price (P = 5) and the price support (Ps = 6), and multiply it by the quantity that the government purchases. In this case, the government purchases the entire excess supply, so the quantity is 50.

Deficiency payment = (Ps - P) * quantity
Deficiency payment = (6 - 5) * 50
Deficiency payment = 50

Therefore, the deficiency payment is 50, indicating that the government will buy the entire excess supply (50 units) and pay a total of 50 dollars.

Please note that a deficiency program may have specific details and regulations, but in this case, based on the information provided, this is how the calculation of quantity supplied, price cleared by the market, and deficiency payment can be done.