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You are an owner of a bakery, and you meet with other neighborhood bakery owners. Consider that fresh baked goods and processed baked goods are substitutes. In an attempt to increase sales, you collectively decide to lower prices by 10%. Which of the following are consequences of this price change? Choose one or more: A. The quantity supplied of fresh baked goods will decrease B. The demand for fresh baked goods will increase. C. The supply of fresh baked goods will increase. D. The supply of fresh baked goods will decrease. E. The demand for fresh baked goods will not change. F. Demand for processed baked goods will decrease

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It is given that a 10 % decrease in prices is collectively decided by the owners of two different bakeries. Also, the fresh baked goods and processed goods are substitutes A decrease in price will reduce the quantity supplied due to the application of law of supply The quantity demanded for freshly baked goods increases but there is no change in the demand because of the decrease in price. The substitute goods share a positive relationship with the prices. So, the demand for processed goods will decrease Thus, option A, E, F.

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