The table below shows the annual demand and supply schedules for a dairy agricultural product (butter).
| Price (£ per kg) | Quantity demanded (000s of kg) | Quantity supplied (000s of kg) |
|---|---|---|
| 6 | 20 | 60 |
| 5 | 30 | 50 |
| 4 | 40 | 40 |
| 3 | 50 | 30 |
| 2 | 60 | 20 |
The government guarantees a minimum floor price of £5 per kg by buying up any surplus. How much will this intervention scheme cost the government each year?
£250 000
£150 000
£100 000
£50 000
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.