The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3 In Figure 21.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium price?

Question

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3  In Figure 21.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium price?

Quizplus · Accepted Answer

An import quota is a restriction on the quantity of a good that can be imported. In this case, the quota is 30 gallons of corn syrup. This means that there will be a reduction in the supply of corn syrup, as the supply curve will shift leftward by 30 gallons at every price level.

At the old equilibrium point (where D and S curves intersect), the original quantity demanded was 60 gallons, and the original price was $8. However, with the quota, the new supply curve will intersect the demand curve at a higher price level and a lower quantity demanded.

To find the new equilibrium price, we need to find the price level where the new demand and supply curves intersect. At the point where the new supply curve intersects the old demand curve, the price is $10 and the quantity demanded is 50 gallons. At the point where the new supply curve intersects the new demand curve, the price is $8 and the quantity demanded is 40 gallons. Therefore, the new equilibrium price is $8.

The Figure Below Shows the Demand (D)and Supply (S)curves of Corn