• • (i) Determine the equilibrium price and quantity for wheat and indicate the equilibrium price and quantity on the graph.
    (1 mark)
    (ii) If the Federal government decided to support the price of wheat at $4.00 per bushel, explain whether there would be a surplus or shortage and how much it would be.
    (1 mark)
    (iii) Demonstrate your answer to part (ii) on your graph being sure to label the quantity you designated as the shortage or surplus.
    (1 mark)
    Do you agree with the following statement? “Government-set prices undermine the rationing function of competitive prices.” Explain carefully in terms of both price ceilings and price floors.
    (2 marks)
    “If demand increases and supply decreases, then both the equilibrium price and quantity will increase.” What conditions are necessary to make this statement true?
    (1 mark)
• 11 hours ago

  Qianhua Lee

  • The president of the Micro Brewing Corporation asks you, as the company economist, to forecast changes in consumer beer purchases associated with a proposed price change. You conduct a survey and find that if the price of a six- pack increases from $5.50 to $7.50, the quantity demanded will decrease from 2200 units to 1800 units a month. Should the Micro Brewing Corporation raise its price? Explain the economic basis for this recommendation to the president.