Imagine the market demand and supply for chicken is such that Qd = 2,000 - 300P and Qs = 800 + 200P. To aid chicken producers, the U. S. government agrees to put a price support on chickens of $3.00 per unit. If this price support goes into effect, how many chickens will the government be forced to buy? How much will the government spend on this policy?

The government has to buy = 300 chickens

The amount spent on this policy = $900

Explanation:

Data provided in the question:

Market demand, Qd = 2,000 - 300P

Supply, Qs = 800 + 200P

Price support on chickens = $3.00 per unit

Now,

At price P = $3.00

Qd = 2,000 - 300 (3.0)

or

⇒ Qd = 2,000 - 900 = 1,100

At price P = $3.00

Qs = 800 + 200 (3.00)

or

⇒ Qs = 800 + 600 = 1,400

Since, Supply is more than demand, so excess supply will be purchased by government

Thus,

The government has to buy = 1400 - 1100 = 300 chickens

Now,

The amount spent on this policy = 300 * 3 = $900