QuestionCalculate the surplus in the corn market with a price floor of \$2.50, given the supply and demand data.

Studdy Solution

STEP 1

Assumptions1. The price floor is set at $.50 an ear. . The table provided gives the quantity supplied and quantity demanded at various price points.<br />3. A price floor means the price cannot go below a certain level, and in this case, it is$ .50.
4. The surplus is calculated as the difference between the quantity supplied and the quantity demanded at the price floor.

STEP 2

First, we need to find the quantity supplied and the quantity demanded at the price floor. According to the table, at a price of $2.50, the quantity supplied is2,400 and the quantity demanded is475.

STEP 3

Next, we calculate the surplus caused by the price floor. The surplus is the difference between the quantity supplied and the quantity demanded when the price is at the price floor.
$Surplus = Quantity\, Supplied - Quantity\, Demanded$

STEP 4

Now, plug in the given values for the quantity supplied and the quantity demanded to calculate the surplus.
$Surplus =2,400 -475$

STEP 5

Calculate the surplus.
$Surplus =2,400 -475 =1,925$ The surplus caused by the price floor is1,925 ears of corn.

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