4. Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and that potatoes are a consumer substitute for bread, we would expect the price of wheat to:
A) rise, the supply of bread to increase, and the demand for potatoes to increase.
B) rise, the supply of bread to decrease, and the demand for potatoes to increase.
C) rise, the supply of bread to decrease, and the demand for potatoes to decrease.
D) fall, the supply of bread to increase, and the demand for potatoes to increase.
To answer this question, we need to understand the concept of supply and demand and how they interact.
In this scenario, a drought in the Great Plains has reduced the supply of wheat. Wheat is a basic ingredient in the production of bread, so when the supply of wheat decreases, the cost of producing bread increases. This means that bread producers will have to pay more for the wheat they need, and they may pass that cost onto consumers by raising the price of bread.
Since the price of bread increases, some consumers may choose to find a substitute for bread. In this case, the question states that potatoes are a consumer substitute for bread. When the demand for a substitute increases, the price of the substitute also tends to increase, as more people are now looking to buy potatoes as an alternative to bread.
Given these explanations, the correct answer would be B) the price of wheat rises, the supply of bread decreases, and the demand for potatoes increases.