ARE120Homework1_Spring08

ARE120Homework1_Spring08 - University of California, Davis...

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University of California, Davis Agricultural Policy (ARE 120), Spring 2008 Homework #1 – Due 10:30 a.m. (in class) Thursday April 10, 2008 1. Many places have policies to protect the poor from high prices of basic necessities such as food and housing. Sometimes the government fixes a maximum price that can be charged for such goods. a. Draw a supply and demand diagram to illustrate the effects when the government passes a law that fixes a maximum price for milk ( be sure to label the axes and curves on your diagram carefully and completely ). b. What are the likely economic effects of this policy? c. Who benefits and who loses? d. Can you suggest a more effective nutrition policy? 2. Suppose the annual supply and demand for California iceberg lettuce are characterized by Demand: Q D = 4 – 0.1 P ; Supply: Q S = -2 + 0.2 P Quantities are in billions of heads of lettuce per year, and prices are in cents per head. For the competitive equilibrium, label the following elements clearly on a supply and demand
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ARE120Homework1_Spring08 - University of California, Davis...

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