I constantly make mistakes in these type of MCQS in eco.

[Sijan92]

Please help me out in by providing an explanation why the answer will be B in the following question? Sorry, I couldn't copy the question cuz it included a table.

M/J 02 paper1 Question 13. please help!!!!!!!!!!!!!!!!!

 

[Sijan92]

Please anyone!!!!!!!!!!!

 

[Sijan92]

Help!

 

[memyself]

Q13- The horizontal line between y & z is the market clearing price, while OP1 is the guranteed price. 'the govt pays the producers the difference between the two prices', which, as can be seen in the figure, is the area u+v+w+x+y

 

[Sijan92]

Why is the horizontal line between y and z the market clearing price? Isn't market clearing price is the price at which quantity demanded equals quantity supplied? The line you are mentioning represents an excess demand over supply.

 

[Sijan92]

Please help me out quick! My exam starts pretty soon.

 

[Sijan92]

Hellow!

 

[Sijan92]

HEEEYYYYYYYYY!!!!!!!!!!!!!!!!!

 

[memyself]

Since this is an agriculture market, we're supposing that supply fluctuates and therefore, after the govt. has guranteed the price OP1, supply had risen to give the new equilbrium price that has been marked (the one between y & z).