Question

If the price of white bread increases, how will it affect a consumer's demand for wheat bread? Describe both the substitution and income effect that the change in price would cause.

Answer 1

Incseae in puice of uohite bread makes it sulatiuely expensive in compasuis ion to nohsat braadl As a gesult Lonsumere uill substitude gealahualy cheaper 2oheat bread in plau of elatiudly expensiue white bread So, damand tor ohite bread declnes and noheat bread inureales . callid substitution atfet This is otheu hand , imuuase in Pnice oleoreas On the 1e the the geal i'ncome f COnsume purchasing pouur duclines ohite bread amd Stmu both Bread are heat Omal goocs their olamand ill fall Lall in graal incoma Hence demand for nohaat bread daclines. This oftect dae to is callid imome In con cusi on, offect inuraaies tue whaat bead Substituhion demand olfect daeraases the whaat breadl imuome Anol tor eftect dem and The met ie aueral tha demand tor oheat bread uil inrease or dlaereaue buill dlapend em srelatiua Shsength at Subshtuhon effect andl imcome thoie other etfeer offect tenols to concel eace as both a