Using economic knowledge, evaluate different ways in which the government of a country which imports large quantities of wheat can try to stabilise wheat prices?
Stabilising wheat prices can be done through a buffer stocks scheme. This is when the government tries to stabilise a market/producer which is producing too little or too much (in the case) wheat. They would do this by buying back a lot of the wheat if it rose above or by giving out some they own in their stock pile to bring production up to the right amount if it dropped below the amount needed by the consumer. This is shown in the diagram below.
Wheat
Wheat

During a good harvest where a larger quantity is produced at Q2 with the price at P2, the government has to intervene by buying some of the stock to enable the producers to return to the equilibrium point of (Q,P) where both the demand and price increase meaning its more profitable for the business than at point (Q2,P2) which is the main objective for a firm. At point (Q1,P1) because of the bad harvest, the price set by the producer is higher than the equilibrium to try and maintain its profits. Unfortunately consumers won’t buy a lot at this price so the government will supply the producers out of its stockpile which in this case is imported in large quantities to stabilise the market. This will mean producers can lower prices to attract more sales from consumers and in turn increase profits.

Another way in which the Government which imports large quantities of wheat can try to stabilise wheat prices is by introducing maximum pricing. This is when an attempt to prevent the market price from rising above a certain level is made by the government by setting a maximum price ceiling below the free market. This is done to prevent monopolies /suppliers exploiting the consumer. This is shown in the diagram below.
Wheat
Wheat

As wheat is