1. Reacting to protests against the high prices of wheat, the government enacted a law which...

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1. Reacting to protests against the high prices of wheat, the government enacted a law which limits the price of wheat. Assume that this is a closed (i.e., non-trading) economy and that the wheat market is perfectly competitive. The government limits the price of wheat to a maximum of Pmax which is below the current market price. [20 points] PA a. i. ii. Q Use a supply and demand diagram to show the effect of this policy on the prices for buyers and sellers and the quantity of wheat sold. Additionally, mark the following from the new wheat market equilibrium in the diagram: the price (P2), the quantity supplied (Q2), the quantity demanded (Q), and the quantity sold (Q*). 1. Reacting to protests against the high prices of wheat, the government enacted a law which limits the price of wheat. Assume that this is a closed (i.e., non-trading) economy and that the wheat market is perfectly competitive. The government limits the price of wheat to a maximum of Pmax which is below the current market price. [20 points] PA a. i. ii. Q Use a supply and demand diagram to show the effect of this policy on the prices for buyers and sellers and the quantity of wheat sold. Additionally, mark the following from the new wheat market equilibrium in the diagram: the price (P2), the quantity supplied (Q2), the quantity demanded (Q), and the quantity sold (Q*).

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a When the government limits the price of wheat to a maximum of Pmax which is below the current market price the following effects can be observed i U... View the full answer