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  3) 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 incomeB: There is an decrease in the price of ryeC: There is an increase in the price of wheatD: There is an improvement in the production technology for bread.  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 wheatB: 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 wheatD: There is a decrease in the price of rye and an improvement in the production technology for bread.  In each case (using appropriate graphs for support) describe the distortions that occur in a competitive market when the government imposes:a price ceilinga price floor

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Part 3(A): As wheat bread is a normal good, an increase in income will result in an increase in demand. 

3(B): A substitute good is a good that can serve as a replacement for another good. In this case, rye bread can replace wheat bread, so if the price of rye...

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Part 3(A): As wheat bread is a normal good, an increase in income will result in an increase in demand. 

3(B): A substitute good is a good that can serve as a replacement for another good. In this case, rye bread can replace wheat bread, so if the price of rye went down, demand for wheat bread would decrease (as more people would choose to buy the cheaper rye bread). Rye bread is cheaper because the input, rye, has decreased in price. 

3(C): Similarly for part B, if the price of wheat increased, the cost of wheat bread would increase. Therefore demand would decrease, as more people would choose to purchase cheaper rye bread instead. 

3(D): An improvement in bread-making technology should increase efficiency of production for both kinds of bread, meaning that both wheat and rye bread should decrease in price, and demand should increase. 

 

4(A): If there is both an increase in income and an increase in the price of wheat (meaning an increase in price of wheat bread), demand will depend on which increase is relatively higher. As this is not stated, it's unclear whether or not demand would increase, decrease, or stay the same. 

4(B): If there is an increase in income and improved bread-making technology, demand should increase greatly. Higher income increases demand for normal goods, and improved technology should decrease the cost of wheat bread, so there are two factors both working to increase demand here. 

4(C):A decrease in the price of rye and an increase in the price of wheat would lead to greatly decreased demand for wheat bread. This is because cheaper rye means cheaper rye bread than usual, and more costly wheat means more costly wheat bread than usual. This should lead to very large numbers of people choosing to buy rye bread instead of wheat bread. 

4(D): A decrease in the price of rye and improved bread-making technologies should decrease prices for both breads (due to the improved technology), but rye bread will be relatively cheaper than wheat bread. This will increase demand for both breads, but demand for rye bread will be especially high. 

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