Ask Question
1 May, 18:14

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

+1
Answers (1)
  1. 1 May, 21:33
    0
    price of wheat to increase, the supply of bread to decrease, and the demand for potatoes to increase.

    Explanation:

    A drought will reduce the supply of wheat thereby causing the supply curve to shift upwards (to the left) leading to an increase in the price of wheat. Since wheat is a basic ingredient in producing bread, an increase in the price of wheat will increase the cost of producing bread. An increase in cost of producing bread will reduce the supply of bread, shifting the supply curve to the right.

    Potatoes and bread are close substitutes and therefore, have a competitive demand. An increase in the price of bread will increase the demand for potatoes because rational consumers will opt for a cheaper alternative considering their money income.
Know the Answer?
Not Sure About the Answer?
Get an answer to your 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 ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers