Figure 4-6 Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of the deadweight loss after the imposition of the price floor?

Question

Figure 4-6  Figure 4-6 shows the demand and supply curves for the coffee market.The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at $7.00.
-Refer to Figure 4-6.What is the value of the deadweight loss after the imposition of the price floor?

Quizplus · Accepted Answer

The deadweight loss is the area of the triangle formed by the supply and demand curves and the price floor. The base of the triangle is the difference between the equilibrium quantity and the quantity supplied at the price floor, which is 300 units. The height of the triangle is the difference between the equilibrium price and the price floor, which is $3. Therefore, the area of the triangle is 1/2 * 300 * $3 = $450.

Figure 4-6 Figure 4-6 Shows the Demand and Supply