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A-LevelEconomicsGovernment microeconomic intervention9708/12 · Feb/Mar 2017 · Q141 Mark

In 2014 some supermarkets reduced the price they were willing to pay farmers for milk to below what was then the market equilibrium price. They passed the lower price onto the consumers in order to try and encourage them into the store. The government then fixed an effective minimum price which the supermarkets had to pay the farmers. These two actions are shown in the diagram. [Diagram] What would be the outcome after the supermarket action and then the government action?

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Ashortage of 5000 litres a surplus of 4000 litres
Bshortage of 5000 litres a surplus of 7000 litres
Cshortage of 13000 litres a surplus of 4000 litres
Dshortage of 13000 litres a surplus of 7000 litres

✓ Correct answer

D: shortage of 13000 litres a surplus of 7000 litres

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About this question

Topic
Government microeconomic intervention, A-Level Economics (syllabus 9708). Multiple choice, 1 mark.
Source
A-Level Economics, Feb/Mar 2017 Paper 1 Variant 2, question 14.

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