📚 Learning Guide
Elasticity in Market Dynamics
easy

If the price of corn increases, what would likely happen to the demand for wheat, assuming they are substitutes?

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Choose the Best Answer

A

Demand for wheat will increase

B

Demand for wheat will decrease

C

Demand for wheat will remain unchanged

D

Demand for wheat will fluctuate unpredictably

Understanding the Answer

Let's break down why this is correct

Answer

When the price of corn goes up, people might start looking for alternatives, and wheat is one of those alternatives because they can be used in similar ways, like in food products. This means that as corn becomes more expensive, more people will likely buy wheat instead, leading to an increase in the demand for wheat. For example, if corn chips become too pricey, consumers might choose to buy tortilla chips made from wheat instead. This change happens because people want to save money while still enjoying similar products. So, in this case, the demand for wheat rises when the price of corn increases due to their substitutable relationship.

Detailed Explanation

When corn gets more expensive, people look for cheaper options. Other options are incorrect because Some might think that if corn costs more, people will buy less wheat; This answer suggests that wheat demand won't change.

Key Concepts

Elasticity of demand
Substitution effect
Market equilibrium
Topic

Elasticity in Market Dynamics

Difficulty

easy level question

Cognitive Level

understand

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