In Canada we have government intervention in the dairy market in the form of quotas on milk production.What are two predicted economic effects of this policy?

Question

Quizplus · Accepted Answer

The government intervention in the dairy market through quotas on milk production will result in a redistribution of income from consumers of dairy products to dairy farmers. This is because the quotas limit the supply of milk, causing prices to rise, and as a result, consumers will end up paying higher prices for dairy products. Dairy farmers, on the other hand, benefit from the higher prices they receive for the limited amount of milk they are allowed to produce. The policy will also result in a reduction in the total amount of economic surplus in the dairy market since it restricts the quantity of milk produced and consumed, causing a loss in consumer surplus and producer surplus.

In Canada We Have Government Intervention in the Dairy Market