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"What effect will a price ceiling imposed by the goveenment have on the supply of farms producing wheat?"
The simplest answer is the law of supply and demand. When the supply is low, the price is high and vice versa.
In some cases, when governments or regulatory bodies set a maximum price for a good, this leads to black markets. To be effective, the maximum price has to be below the market price that prevails as a result of the interaction of demand and supply. For example, the market price of wheat is $5. Government is regulating the industry and fixes a price of $4 as the maximum price. Supply of wheat is going to reduce and demand is going to increase based on the laws of demand and supply. This will lead to a shortage as people are demanding more wheat than is being supplied. Some consumers will be willing to pay the original market price for wheat ($5) and some will be willing to pay even higher. This leads to a black market where suppliers will provide the willing consumers with wheat at a price higher than the prevailing one.
A price ceiling prevents a price from rising above the ceiling. It represents an upper limit on the price of something. If wheat has a price ceiling of $400 per metric tonne, $400 is the highest amount any what supplier can charge. If the market price for wheat is below the ceiling, say $200 in this example, then the ceiling has no effect on prices; the ceiling is not binding. If the market price is higher than the ceiling, supply and demand cannot reach equilibrium and there is a shortage in the commodity. Artificially low prices result in demand that exceeds supply. The price, however, remains stuck at the ceiling.
The price of various commodities depends upon supply and demand. Wheat is one such commodity and last year's wheat crop yields, especially in Russia, were badly hit by adverse weather conditions causing a shortage and driving up the price on the international markets.
"What effect will a price ceiling imposed by the goveenment have on the supply of farms producing wheat?"
The simplest answer is the law of supply and demand. When the supply is low, the price is high and vice versa.
In some cases, when governments or regulatory bodies set a maximum price for a good, this leads to black markets. To be effective, the maximum price has to be below the market price that prevails as a result of the interaction of demand and supply. For example, the market price of wheat is $5. Government is regulating the industry and fixes a price of $4 as the maximum price. Supply of wheat is going to reduce and demand is going to increase based on the laws of demand and supply. This will lead to a shortage as people are demanding more wheat than is being supplied. Some consumers will be willing to pay the original market price for wheat ($5) and some will be willing to pay even higher. This leads to a black market where suppliers will provide the willing consumers with wheat at a price higher than the prevailing one.
Any short-term measures, from a price ceiling,that the government might use to help alleviate the shortage of wheat
Since corn and wheat can both be used as types or grain, they are in a way interchangeable amongst buyers. These types of goods are called substitute good, one can be substituted for another. If the price of corn rises, that leaves wheat being the more favored product (because it's cheaper). When an increase for the demand for wheat increase, the supply will decrease. The opposite would happen if the price of corn falls. If it falls under the price of wheat, corn will then be more favored. Thus making it the more demanded product. Under the law of demand, supply and demand work in opposite directions. When the demand increases, the supply decreases. When the demand decrease, the supply increases.
A price ceiling prevents a price from rising above the ceiling. It represents an upper limit on the price of something. If wheat has a price ceiling of $400 per metric tonne, $400 is the highest amount any what supplier can charge. If the market price for wheat is below the ceiling, say $200 in this example, then the ceiling has no effect on prices; the ceiling is not binding. If the market price is higher than the ceiling, supply and demand cannot reach equilibrium and there is a shortage in the commodity. Artificially low prices result in demand that exceeds supply. The price, however, remains stuck at the ceiling.
The price of various commodities depends upon supply and demand. Wheat is one such commodity and last year's wheat crop yields, especially in Russia, were badly hit by adverse weather conditions causing a shortage and driving up the price on the international markets.
The building of the Aswan Dam project increased the opportunity to engage in agriculture by establishing a steady water supply through droughts and floods. Sugar, rice and wheat production has increased significantly.
In the most basic terms, and assuming the market in question is free from non-market influences, there are two reactions to a change in the supply of any commodity. First, the market for that commodity can shrink along with the supply. Second, the market price of the commodity can rise, thereby decreasing demand while simultaneously encouraging an increase in supply. An excellent example of these forces at work is the corn market. In recent years, the demand for corn has increased dramatically (although most of the change was due to government intervention in the market). Over a period of two growing seasons, the price of feed corn nearly doubled as potential buyers competed for the limited supply, and production increased as a direct response to this rise in price, as farmers made the choice to place more acreage in corn and less in other crops, such as soybeans and wheat. These changes had ripple effects in other markets too; prices of soybeans and wheat also rose as the supply fell due to the farmers' choices, thereby encouraging farmers to increase the supply of those commodities. In the end, demand, supply and price tend to stabilize as producers and buyers reach a balance wherein the producers are willing to meet demand for a given price.
The price of wheat will decline.
Increase in wheat production per hectare has occurred because of more fertiliser, mechanisation, large farm units, good quality of seeds are being used on larger, more commercial farms and improved water 💦 supply from tube well. The weat out put has increased over 5 times from 1960 -2007
If demand remains constant and supply decreases, then the price will rise. The law of supply and demand says that a price will move either up or down based on the balance of supply and demand. As the supply decreases, prices will move higher because the product is more scarce. As supply increases, prices will move lower because the product is readily available. For instance, suppose there is a drought and wheat is in short supply. The price of flour and bread will increase because people still want to buy them but they are in short supply. On the other hand, if there is a bumper crop and wheat is plentiful, the cost will drop as farmers compete to sell their crops. Prices are also affected by demand. Several years ago, Beanie Babies were in great demand as collector items so prices soared. Today, however, the demand is much lower so prices have dropped greatly (with basically the same supply on the market).