Question

The government sets the price of wheat for the coming year above the equilibrium price. What effect would this have on supply and demand? The amount of wheat produced and demanded will drop the next year. The amount of wheat produced and demanded will rise the next year. There will be more wheat produced than demand requires. There will not be enough wheat produced to keep up with demand.

Answer 1

There will be more wheat produced than demand requires. This is a simple scenario of the Law of Supply and Demand, they are both dependent with each other. When prices are too high, consumers' demands become low because they are thinking on the practical side. Thereby, increasing the supply because it has not been purchased by the consumers.