Figure 7.4 Global Market for Tin
-Consider the global market for tin represented by figure 7.4.Initially equilibrium is at point A with a market price of $3.50 per pound and 50,000 pounds.In ordr to keep tin price relatively stable an International Tin Agreement has set a price floor of $3.27 and a ceiling of $4.02.As the demand for tin increases to D₁ how will the buffer-stock manager need to respond?

Question

Figure 7.4 Global Market for Tin

-Consider the global market for tin represented by figure 7.4.Initially equilibrium is at point A with a market price of $3.50 per pound and 50,000 pounds.In ordr to keep tin price relatively stable an International Tin Agreement has set a price floor of $3.27 and a ceiling of $4.02.As the demand for tin increases to D₁ how will the buffer-stock manager need to respond?

Quizplus · Accepted Answer

As demand increases, the price would naturally rise above the equilibrium. To maintain the price within the set ceiling of $4.02, the buffer-stock manager would need to sell tin, reducing the price pressure. Selling 20,000 pounds would help achieve this.