Suppose the total demand for wheat and total supply of wheat per month in theKansas City Grain Market are as follows:

Thousands ofPrice perThousands of

Bushels demandedBushelBushels supplied

85$3.4072

803.7073

754.0075

704.3077

654.6079

604.9081

a.What will be the market or equilibrium price?What is the equilibrium quantity?

b.Why will $3.40 not be the equilibrium price in this market?Why not $4.90?"Surpluses drive prices up; shortages drive prices down."Do you agree?

c.Assume now that the government establishes a price floor (support) of, say $4.60for wheat.Explain carefully the effects of this supported price.What might prompt the government to establish this price support?