A-LevelEconomicsGovernment Intervention (Price Controls)May/June 2016Paper 1 Q171 Mark
In the diagram, DD is the demand curve for an agricultural commodity, S₁ is the supply curve in period 1 and S2 is the supply curve in period 2. The broken curve is a rectangular hyperbola. [Figure X.X] The government operates a buffer stock scheme fixing the price at OP₁ in period 1 and OP2 in period 2. How do output and farm revenue in period 2 compare with period 1?
Ahigher, same
Bhigher, higher
Clower, higher
Dlower, same
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The correct answer is A. This question tests the candidate's understanding of government intervention (price controls) within the Economicssyllabus. The examiner's mark scheme requires...
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