demand is given by : Qd=20-3P Supply is given by: Qs= 2 + 3p what is the cost to

Question

demand is given by : Qd=20-3P Supply is given by: Qs= 2 + 3p what is the cost to a government that sets a price floor of $4 in this market and then agrees to buy up any surplus that exists? demand is given by : Qd=20-3P Supply is given by: Qs= 2 + 3p what is the cost to a government that sets a price floor of $4 in this market and then agrees to buy up any surplus that exists? demand is given by : Qd=20-3P Supply is given by: Qs= 2 + 3p what is the cost to a government that sets a price floor of $4 in this market and then agrees to buy up any surplus that exists?

Explanation / Answer

At floor price of $4, Qd will be equal to 8 i.e. Qd= 20-3*(4)

At floor price of $4, Qs will be equal to 14 i.e. Qs= 2+ 3*(4)

In this case, surplus supply will be 6 which is calculated as Qs minus Qd

So government will have to buy 6 surlplus units at $4 each, total cost will be $24 i.e. 6 units multiplied by $4

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