Refer to the table below. Suppose that the government establishes a price ceiling of $3.70 for wheat.
|
Thousands of Bushels Demanded
|
Price per Bushel
|
Thousands of Bushels Supplied
|
|
85
|
$3.40
|
72
|
|
80
|
3.70
|
73
|
|
75
|
4.00
|
75
|
|
70
|
4.30
|
77
|
|
65
|
4.60
|
79
|
|
60
|
4.90
|
81
|
What might promote the government to establish this price ceiling? Explain carefully the main effects. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effects of this price floor? Include a graphical representation in your answer.