In the market for wheat, if the price of ethanol (which is made from corn, a substitute in production) increased dramatically, the _____ wheat would _____.
A)supply of; increase
B)supply of; decrease
C)demand for; increase
D)demand for; decrease

Question

Quizplus · Accepted Answer

Ethanol is a substitute for wheat in production, and an increase in the price of ethanol would make its production relatively more profitable than wheat. This would lead wheat farmers to switch to producing ethanol, thereby reducing the supply of wheat in the market.

In the Market for Wheat, If the Price of Ethanol