The diagram below illustrates the international tin market.Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.1.Defending the Target Price in Face of Changing Demand Conditions

-Consider Figure 7.1.Suppose the demand for tin decreases from D0 to D2.Under a buffer stock system,the buffer-stock manager could maintain the target price by:

Question

The diagram below illustrates the international tin market.Assume that producing and consuming countries establish an international commodity agreement under which the target price of tin is $5 per pound.
Figure 7.1.Defending the Target Price in Face of Changing Demand Conditions
 
-Consider Figure 7.1.Suppose the demand for tin decreases from D0 to D2.Under a buffer stock system,the buffer-stock manager could maintain the target price by:

Quizplus · Accepted Answer

Under a buffer stock system, to maintain the target price when demand decreases, the buffer-stock manager would buy tin to reduce supply and support the price. Since the demand decreased from D0 to D2, buying 30 pounds of tin would help maintain the target price.

The Diagram Below Illustrates the International Tin Market