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Government intervention

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Question 7

The diagram below shows the supply and demand for basic wheat flour in a local market.

Supply and demand diagram for basic wheat flour with a maximum price set at P1

Which of the following is the most likely outcome if a maximum price is legally enforced at P1P_1P1​?

There will be a surplus of basic wheat flour

There will be excess demand (a shortage) in the market

More suppliers will be incentivised to enter the market

The market will maintain its market-clearing equilibrium price

Government intervention Questions

  1. A Level
  2. /Economics
  3. /Government intervention