https://file.aiquickdraw.com/mathbot/file/17294756595069ea8clkz.jpg

The image you've uploaded involves an economic problem where a price floor is imposed on the hay market at $14 per bale. Let's break it down step by step:

1. **Understanding the Surplus:**
   - The price floor is set at $14, which is above the equilibrium price (the price where the supply and demand curves intersect).
   - This creates a surplus because at this higher price, the quantity of hay supplied exceeds the quantity demanded.
   - From the graph, you can observe:
     - At the price floor of $14, the **quantity supplied** is around **8,000 bales** (from the supply curve).
     - At the price floor of $14, the **quantity demanded** is around **5,000 bales** (from the demand curve).
   - The surplus is the difference between the quantity supplied and the quantity demanded:  
     Surplus = $ 8,000 - 5,000 = 3,000 $ bales.

   Thus, the surplus due to the price floor is **3,000 bales**.

2. **Question on the long-term effects of the surplus:**
   - The question asks about the likely outcome in the long run due to the surplus caused by the price floor. Let's analyze the options:
     - **Increase because the demand curve will become more inelastic**: This is unlikely because demand usually does not become more inelastic over time due to a price floor.
     - **Decrease because farmers will devote more of their land to other crops**: This could happen, but it's less directly linked to the immediate effect of a price floor.
     - **Increase because farmers will increase the amount of land used to grow hay**: This is the most plausible answer. The price floor incentivizes farmers to produce more hay because the price is artificially high.
     - **Decrease because the demand curve will become more inelastic**: Again, inelasticity is not directly a factor caused by the price floor.

   Therefore, the correct answer is likely: **Increase because farmers will increase the amount of land used to grow hay**.

Would you like further details or have any questions?

Here are 5 related questions to consider:
1. How does a price floor impact consumer surplus?
2. What would happen if the price floor were set below the equilibrium price?
3. How does the government typically manage the surplus caused by price floors?
4. What are other real-life examples of price floors?
5. How would the surplus change if the supply or demand curves shifted?

**Tip:** When analyzing market imbalances, always look at the difference between quantities supplied and demanded at the set price level to determine surplus or shortage.

Assume that in order to help hay farmers, the government imposes a price floor on hay of $14 per bale and the price floor stays in place for the long run. What is the surplus from this long-run price floor?

Analyze the impact of a price floor of $14 per bale in the hay market, resulting in a surplus of 3,000 bales. Learn about how price floors affect supply and demand over the long run.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation