Analyzing Effects: Consumer concerns about nutrition and obesity contribute to a decrease in white bread sales and an increase i
n sales of whole wheat bread. This change in consumer taste prompts a major manufacturer known for its white bread to enter the market with a whole wheat bread product. What effect will this action have on the supply and equilibrium price of whole wheat bread?
The major manufacturer entering the market will lead to an increase in the supply of whole wheat bread and a decrease in its equilibrium price.
As a result of the major manufacturer entering the whole wheat market:
Supply will increase because the major manufacturer will produce more bread to be sold.
The equilibrium price will decrease because there will be more bread in the market relative to the demand for it.
When the supply of something increases more than the demand, the price will drop because the good is now less scarce. This is the case here. The supply of the bread increased as a result of the major manufacturer, so the prices will decrease.
In conclusion, the major manufacturer will increase supply but also reduce prices.
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