Economics (AS & A Level) · Feb / March 2021 · Paper 12 · Question 12

The market for wheat is in equilibrium at price P with supply at 40 million tonnes. Due to a drought in the growing season, supply falls to 20 million tonnes. Which immediate action should be taken to maintain the equilibrium price of P?

1. Agrant a subsidy to farmers equivalent to PP1
2. Bimpose an indirect tax equivalent to PP2
3. Cplant more wheat to increase supplies to 40 million tonnes
4. Duse existing stocks of wheat to increase supplies by 20 million tonnes

As printed in the paper