Question

Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:
a. fall, the supply of bread to increase, and the demand for potatoes to increase.
b.rise, the supply of bread to decrease, and the demand for potatoes to increase.
c. rise, the supply of bread to decrease, and the demand for potatoes to decrease.
d. rise, the supply of bread to increase, and the demand for potatoes to increase.

Answer 1

Ooops... thought this was a history thing... supply/demand.

Ingeneral, as supply goes up, it can exceed demand. As demand goes up it can out pace supply.

Answer 2

Um. That doesn't really help me

Answer 3

Well, of you reduce the supply, but the demand stays the same, then it is harder to get. What would that do tot the price?

Answer 4

Rise?

Answer 5

Exactly! Wheat would rise in price, which means all wheat based products would also rise. So, you can eliminate any wheat product drop price answers.

Now, what else do you think would happen is bread is more expensive?

Answer 6

The demand for potatoes to increase?

Answer 7

Eactly! Because bread is harder to get, people go over to the subsitute.

Answer 8

So which answer has those things covered?

Answer 9

B?

Answer 10

=)

Answer 11

Yay! Thank you!

Answer 12

And that is how you apply supply/demand logic.

Have fun!