2. Suppose the inverse demand curve is P=10-2Q and inverse supply is P=2 2Q for rye. The government wants to support rye producers and imposes a price floor of $8.

a. Draw this scenario, shading CS and PS.

b. What is the original equilibrium price and quantity?

c. Is there a shortage or surplus after the price floor is imposes? What is this value?

d. What is producer surplus, consumer surplus and dead weight loss?

Rye Market with Price Floor Demand Supply 7 Consumer Surplus Producer Surplus 6 Price Floor Quantity Supplied at Price Floor - -- Quantity Demanded at Price Floor 5 Quantity 4 3 2 0 O 2 4 6 00 10 Price