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Price
(dollar per tonne)
Quantity
demanded
(kilo tonnes)
supplied
100
2,000
0
150
1,400
600
200
1,200
800
250
1,000
300
350
400
The table shows the demand and supply schedules for US wheat market. The US Farm Bill 2012 indicates that the domestic price of wheat will be set at $300 per tonne, which is above the market equilibrium level of $250 per tonne, in order to support for domestic wheat growers. At the market equilibrium, 1,000 kilo tonnes (Kt) are supplied.
n a graph, explain how the price control in the US would change the consumer surplus, producer surplus, and deadweight loss in the domestic wheat market. Assume that the US does not trade wheat internationally. Also, calculate the changes in consumer surplus, producer surplus and deadweight loss. (Remember 1 kilo tonne = 1,000 tonnes)
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