Suppose that potatoes an inferior good are purchased


Suppose that potatoes (an inferior good) are purchased primarily by poor people. The supply of potatoes to the market is seasonally limited by the size of the current crop q0 (i.e., the supply curve is perfectly inelastic in the short run), but demand slopes downward. In a proposal intended to aid the poor, it has been suggested that the government buy potatoes on the open market at the going price and resell them to the poor at half that price. With the aid of a diagram, analyze the effect of the proposed policy on (i) the poor, (ii) the potato farmers, and (iii) the tax payers.

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Business Economics: Suppose that potatoes an inferior good are purchased
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