When an increase in the price of wheat,an important ingredient in the production of bread,happens at the same time as an increase in the number of people consuming bread:
A)both the equilibrium price and quantity will increase.
B)equilibrium quantity will decrease,but equilibrium price may decrease,increase,or stay the same.
C)both the equilibrium price and quantity will decrease.
D)equilibrium price will increase,but equilibrium quantity may decrease,increase,or stay the same.

Question

Quizplus · Accepted Answer

When the price of wheat, an important ingredient in the production of bread, increases, the cost of producing bread increases. Therefore, the supply of bread will decrease as the cost of producing it has increased. At the same time, if the number of people consuming bread increases, the demand for bread will increase. Since demand has increased and supply has decreased, the market price of bread will increase (equilibrium price will increase), but the equilibrium quantity may decrease, increase, or stay the same depending on the extent of the shifts in supply and demand. Therefore, choice D is the best answer.

When an Increase in the Price of Wheat,an Important Ingredient