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Chapter 4: Q. 4.13 (page 94)

In 2016,the government ofanation establisheda

price support for wheat.The government's sup

port price has been above the equilibrium price

each year since,and the government has pur

chased all wheat over and above the amounts that

consumers have bought at the support price.

Every year since 2016,there has been an increase

in the number of wheat producers in the market.

No other factors affecting the market for wheat

have changed.Predict what has happened every

year since 2016,to each of the following:

a.Amount of wheat supplied by wheat producers

b.Amount of wheat demanded by all wheat con

sumers

c.Amount of wheat purchased by the government

Short Answer

Expert verified

Supply: increased

Demand: fell

Government had to purchase more.

Step by step solution

01

Step1. Given information

The government has fixed a support price above the equilibrium level for wheat, and it purchases any additional quantity.

02

Step2. a. Explanation

a. Since, the support price imposed is always above the equilibrium price, the number of suppliers will keep adding, and hence the supply in the wheat market will keep rising.

03

Step3. b. Explanation 

b. Since the price support each year is greater than the equilibrium price, the demand will keep falling with each passing year.

04

Step4. c. Explanation

Since the demand is falling and the supply rising, the difference between the two, i.e., excess supply will keep rising. Hence, government spending to purchase the excess supply will keep rising.

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How do you suppose that when soft drink sellers introduced cans containing 7.5 ounces of soft drink to sell alongside traditional 12-ounce cans, they managed to offer the soft drinks in the smaller cans at prices that were several cents higher per ounce of soft drink?

Suppose that in Figure 4-4,the government

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Will the excess quantity of milk supplied increase

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Suppose that Figure 4-5 applies to the labor market in

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the state were to decide to establish its own minimum

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There are simultaneous changes in the demand for and supply of tablet devices, with the consequences being an unambiguous decrease in the equilibrium quantity of these devices but no change in the market clearing price. What changes in the demand for and supply of tablet devices could have generated these outcomes? Explain.

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