Demand. Supply, and Price 31 3. The following diagram illustrates a hypothetical market for farm machinery in Canada. $ 'S 40,000 Price 30,000 20,000 10,000 50 100 150 200 250 Quantity (000's) The federal government has decided that output in this industry should increase by 50 percent. Since current industry output is 100,000 units, it therefore plans to purchase 50,000 units of farm machinery regardless of price. The government intends to give away these units to third world countries as part of Canada's foreign aid. (a) Draw the new demand curve for farm machinery that takes into account govern- ment demand. What are the new levels of equilibrium price and quantity? (b) By how much does industry output increase in percentage terms? Why does this increase fall short of the government's target of 50 percent? (c) How many units would the government have to purchase in order to satisfy its objective of increasing industry output to 150,000 units? What is the associated quantity demanded by the private sector (i.e., by nongovernment consumers in Canada)