<p>The answer is indeed A:</p>

<p>Initial farm income is $\$5 \times 2,000 = \$10,000$. </p>

<p>If the supply is $S_2$, then current income is below that figure. 
However,  if the government takes away from the market 1,000 tonnes,  then the supply curve will shift left by that amount, resulting in a new equilibrium with 4,000tonnes @ \$2. 
Therefore farm income is now:  $\$2 \times 4,000 = \$8,000$. The government buys the buffer at market price,  thus $\$2 \times 1,000 = \$2,000$. We end up with the same farm income as in the initial situation: $\$8,000 + \$2,000 = \$10,000$.</p>

CC BY-SA 3.0
2016-01-04T11:23:19.333Z
Oh I see now, I forgot to add on what the farmers' revenue from the govt would be (2x1000), your explanations are very clear, many thanks.
tsp216
CC BY-SA 3.0
2016-01-04T09:17:07.837Z
2016-01-04T09:17:07.837Z
Hector
<p>Here's a question which I don't quite know how to answer. Originally, my answer was (D), though when I checked it the correct answer was (A). As far as my knowledge goes, buffer stocks are buying/selling of stocks by the government to help manipulate supply. Please help provide some elucidations, many thanks.
<a href="https://i.sstatic.net/6veb3.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/6veb3.jpg" alt="enter image description here"></a></p>

<government>
Calculations regarding Buffer stocks?
tsp216
# Calculations regarding Buffer stocks?

(Asked by: username_0 on 2016-01-04)

Here's a question which I don't quite know how to answer. Originally, my answer was (D), though when I checked it the correct answer was (A). As far as my knowledge goes, buffer stocks are buying/selling of stocks by the government to help manipulate supply. Please help provide some elucidations, many thanks.
[![enter image description here](https://i.sstatic.net/6veb3.jpg)](https://i.sstatic.net/6veb3.jpg)

**Tags:** government

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## 1 answers

### Answer by username_1 on 2016-01-04. Score: 1 | Accepted answer

The answer is indeed A:

Initial farm income is $\$5 \times 2,000 = \$10,000$.

If the supply is $S\_2$, then current income is below that figure.
However, if the government takes away from the market 1,000 tonnes, then the supply curve will shift left by that amount, resulting in a new equilibrium with 4,000tonnes @ \$2.
Therefore farm income is now: $\$2 \times 4,000 = \$8,000$. The government buys the buffer at market price, thus $\$2 \times 1,000 = \$2,000$. We end up with the same farm income as in the initial situation: $\$8,000 + \$2,000 = \$10,000$.

> **Comments:**
> **username_0**: Oh I see now, I forgot to add on what the farmers' revenue from the govt would be (2x1000), your explanations are very clear, many thanks.  

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