The demand and supply functions for pulses are Qd =15– P and Qs= 4+ P respectively. The Government announces a support price of Rs.6 per Kg of pulses and would like to release pulses to the market only through Food Corporation of India (FCI). Accordingly FCI procures the pulses and off loads the same at a price that clears the procured stock. Assuming support price equals to procurement cost. What is the total loss incurred by FCI?
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sudhirnair3470:
is it 50 paisa?
perkg
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Answer: ₹6
Explanation:
Qd = 15– P and Qs = 4+ P
15– P = 4+ P
P = ₹5.5
Q = 9.5 units
Govt. procures at ₹6
At this price,
Qd = 15– P = 15-9
Demand = 9 units
Supply = 10 units
Qs = 4+ P = 4+6
There is a surplus of 1 unit
Total Loss = Price X Surplus = ₹ 6 X 1
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