Answer to Question #170460 in Microeconomics for isaac mensah

Question

How will the following changes affect the market price of wheat flour (assuming that the market is initially in equilibrium)? In each case, sketch what happens to the demand and/or supply curves and, as result, what happens to the equilibrium price. (a) People consume more bread. (b) The discovery of a new cheaper way of milling flour. (c) The prices of other grains rise. (d) Rice and potatoes fall in price. 

Answer 1

(a) If people consume more bread, then the demand and price of wheat flour will increase.

(b) The discovery of a new cheaper way of milling flour will increase the supply and decrease the price of wheat flour.

(c) If the prices of other grains rise, then the demand and price of wheat flour will increase.

(d) If rice and potatoes fall in price, then the demand and as a result the market price of wheat flour will decrease.