Answered: Assume that the markets for sugar cane,…

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter4: Markets In Action

Section: Chapter Questions

Problem 19SQ

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Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes in consumption.

If the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. Explain how will this impact the revenues for sugar growers, rum producers and whiskey producers?

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