Because of an increase in the price of wheat, an important ingredient in the production of bread, combined with 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

An increase in the price of wheat, a key ingredient in bread production, will raise the cost of producing bread, causing an upward shift in the supply curve for bread. This will lead to an increase in the equilibrium price for bread. However, an increase in the number of people consuming bread will shift the demand curve for bread to the right, causing the equilibrium quantity to increase. Therefore, the equilibrium price will increase, but the equilibrium quantity may decrease, increase, or stay the same, depending on the relative magnitudes of the supply and demand shifts. Option D is the only choice that reflects this potential outcome.

Because of an Increase in the Price of Wheat, an Important