In each case explain (using appropriate graphs for support) what happens to prove and output in the market for wheat bread; assuming that wheat bread is a normal good, rye bread is a substitute in consumption, wheat is an input in making wheat bread and rye is an input in making rye bread.
A: There is an increase in income
B: There is an decrease in the price of rye
C: There is an increase in the price of wheat
D: There is an improvement in the production technology for bread.
4) Continuing with the previous problem, explain (using appropriate graphs for support) what happens to price and output when:
A: There is an increase in income and an increase in the price of wheat
B: There is an increase in income and an improvement in the production technology for bread.
C: There is a decrease in the price of rye and an increase in the price of wheat
D: There is a decrease in the price of rye and an improvement in the production technology for bread.
5) In each case (using appropriate graphs for support) describe the distortions that occur in a competitive market when the government imposes:
a price ceiling
a price floor