ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the price effect will cause growers to sell less wheat at lower prices.
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growers will offer less wheat at each and every price.
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no wheat products will be produced that year.
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none of the above.
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Detailed explanation-1: -Wheat is staple food, which is highly affected by temperature and CO2 elevation. It not only affects wheat yield but also make wheat vulnerable to several diseases. High temperature causes a high rate of transpiration, which causes drought that ultimately leads to low productivity.
Detailed explanation-2: -The price of wheat is determined by supply and demand factors, in particular the price of oil, global population, income growth, price of substitutes and climate factors affecting the supply.
Detailed explanation-3: -Since the PES for wheat is less than 1, it implies that any change in the P of wheat will cause a very negligible change in the QS of wheat. Hence, the supply of wheat is price inelastic.
Detailed explanation-4: -Answer and Explanation: The correct option is: (c) An increase in the price of corn. Here, the supply of wheat will decrease when there is an increase in the price of corn because producers will be more willing to produce and supply corn as corn will give higher revenue to them.