Question

Depict the effect of the actual or proposed government intervention on a demand-supply graph. Is it a price floor, a price ceiling, a quantity minimum or a quantity maximum? This is a theoretical graph; it does not have to have real numbers. The graph can be hand drawn.

Answer 1

here, is the milk market where the government has set a minimum price at $15, the market clearing price was at $10, at a higher minimum price the firm will increase the supply to 100 and the demand will fall to 50, the remaining 50 will be a surplus in the market.