Question

Consider the market demand and supply for wheat. A lack of rain (resource) has resulted in an average volume of wheat available. However, studies indicate that consumers preferences for whole wheat flour products is increasing due to a more health conscious society. What is the effect on the price and quantity of wheat?

Answer 1

Answer: Average volume of wheat will lead to increase in price and decrease in quantity demanded, while increase in demand for whole wheat products will lead to an increase in price and an increase in quantity supplied.

Explanation: The lack of rain has led to an average volume of wheat available. This means that the yield of wheat was below optimum level, and it will drive up the price of the available wheat, and it will lead to a decrease in quantity demanded.

However, as studies have shown that consumers are now demanding more of whole wheat flour products, this means there will be an increase in demand of wheat, an increase in demand will therefore lead to a higher price and this will in turn lead to an increase in quantity supplied.