1. The effect of the government setting the price of wheat below equilibrium with a price ceiling is that an ongoing shortage of wheat will occur. With a price lower than equilibrium, everyone will want to buy wheat because the price is so good, so there will not be enough wheat to satisfy the demand due to demand exceeding supply. Since the price ceiling means that sellers will not be allowed to raise the price, the shortage will continue unless the government changes its mind and removes the price ceiling.
The effect of the government setting the price of wheat above equilibrium with a price floor is the opposite of the above situation. With the price above equilibrium, there will be few interested buyers, so an ongoing surplus of wheat will result due to supply exceeding demand. Although without a price floor, sellers might consider lowering the price, the price floor ensures that the price will not go lower, so the surplus will continue (Rittenberg & Tregarthen, n.d.).
2. The market for fried chicken wings can change according to a variety of factors.
a. If the price of hamburgers increases, the market for fried chicken wings could increase accordingly, but that depends upon whether hamburger lovers also like chicken. Assuming that consumers like both meats equally, the demand for fried chicken wings will go up, and chicken will take the place of hamburgers in consumers' budgets. However, if hamburger-buying consumers dislike chicken wings, a change in the price of hamburgers is not likely to affect the market for fried chicken wings; the price of hamburgers will go up, but the price of chicken wings, as well as the demand for them, will stay the same.
b. If a disease develops that kills a large proportion of chickens, the price of chicken wings will go up, because demand will be greater than supply. This situation will continue until chicken growers have a chance to
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