Economics: Supply and Demand and Quantity

Question 1
On separate demand and supply diagrams for bread, sketch the effects of the following:
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(a) a rise in the price of wheat

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As the sketch shown above the supply curve is shift to the left, the price of the bread rises the quantity of sold will fall. Wheat is use in a flour to make a bread, therefore if the wheat price goes up the cost of producing will also increase. Hence the shift of the supply curve is to the left.

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(b) a rise in the price of butter and margarine;
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Margarine Margarine Butter Butter
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As the sketch shown above, the demand curve will shift to the left. This shows that the price of the bread will fall when the quantity sold falls. Butter and margarine is a complementary goods for bread. If this butter and margarine increase they price, the combination of butter and margarine and the bread will be less consumed. Price
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(c) a rise in the price of rice, pasta and potatoes

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Pasta Pasta Rice Rice
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Potatoes Potatoes

As the sketch shown above the demand curve will shift to the right, which shows that the price of bread will rise when the quantity rises. Rice, pasta and potatoes is substitutes goods for bread. If this substitutes goods price rises, they will be less purchase than bread.

Question 2
This question is concerned with the supply of oil for central heating. In each case consider whether there is a movement along the supply curve (and in which direction) or a shift in it (and whether left or right). (a) New oil fields start up in production.
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