Question

Public Domain The government sets the price of wheat for the coming year above the equilibrium price. What effect would this have on supply and demand?

Answer 1

The government sets the price of wheat for the coming year above the equilibrium price. A price floor that is set above the equilibrium price creates a surplus. A surplus is used to describe many excess assets including income, profits, capital and goods. Therefore, supply and demand is in excess or is more than what is required. Hope this answers the question.

Answer 2

The demand is low and the supply would be higher because higher prices would discourage buyers.