Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 8

Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the nearby table. Suppose that the government establishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling? Explain carefully the main effects. Demonstrate your answer graphically. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effects of this price floor? Demonstrate your answer graphically.