Suppose a positive technological change in the production of disease-resistant corn caused the price of corn to fall. Holding everything else constant, how would this affect the market for wheat (a substitute for corn)?
A) The demand for wheat would decrease and the equilibrium price of wheat would decrease.
B) The supply of wheat would increase and the equilibrium price of wheat would decrease.
C) The demand for wheat would increase because consumers could afford to buy more wheat and corn.
D) The demand for wheat would decrease and the equilibrium price of wheat would increase.
A
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The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government should not balance its budget but instead have budget deficits during
a. economic booms. b. during periods of peace but surpluses during periods of war. c. periods of inflation. d. economic recessions.
Since the minimum food budget used to determine the poverty line is not adjusted for changes in the standard of living, it is, in principle:
A. a relative measure of poverty. B. an optimal measure of poverty. C. an inaccurate measure of poverty. D. an absolute measure of poverty.
When the price level falls:
A. there is a decrease in spending that is sensitive to interest-rate changes. B. holders of financial assets with fixed money values increase their spending. C. there is a decrease in the quantity of goods demanded as net exports. D. the demand for money rises.