About 100 million pounds of jelly beans are consumed in the United States each y

Question

About 100 million pounds of jelly beans are consumed in the United States each year, and the price has been about 50 cents per pound. However, jelly bean producers feel that their incomes are too low and have convinced the government that price supports are in order. The government will therefore buy up as many jelly beans as necessary to keep the price at SI per pound. However, government economists are worried about the impact of this program because they have no estimates of the elasticity's of jelly bean demand or supply. Given market data shown in the graph to the right, the price support costs the government million. (Enter your response rounded to the nearest million dollars.)

Explanation / Answer

At $1, the demand for jelly bean is 75 million pounds but supply is 125 million pounds. The difference (125-75) = 50 million pounds.

The total valnue that government bears: 1x50 =50 million

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