Macroeconomics + Economy 2009 Update 18th Edition by Campbell McConnell, Sean Masaki Flynn,Stanley Brue

Exercise 16

Refer to the table in question 8. 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.