The diagram shows the market for sugar which is in equilibrium at a price of OP.
A government then fixes a maximum price of $O{P_1}$.
What will happen as a result?
1 )
an increase in consumer surplus equal to $PRU{P_1}$
a reduction in expenditure by people who still buy sugar equal to $PQS{P_1}\;$
3 )
a reduction in farmers’ receipts equal to QRML
4 )
farmers’ receipts would be PQLO
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