The wheat market is initially in equilibrium at price P, with supply standing at 40 million tonnes. Because a drought occurs during the growing season, supply drops to 20 million tonnes. What immediate action should be taken to keep the equilibrium price at P?
- Agrant a subsidy to farmers equivalent to PP1
- Bimpose an indirect tax equivalent to PP2
- Cplant more wheat to increase supplies to 40 million tonnes
- Duse existing stocks of wheat to increase supplies by 20 million tonnes