Market equilibrium for cereals

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Reference no: EM131171785

"The price on wheat has fallen from $9 a bushel to $7 a bushel in the past seven months as rain and snow fell on the southern states." [Source: The Wall Street journal, February 12, 2013]

Explain the effect of the fall in the wheat price on the market equilibrium for cereals. For those unfamiliar with U.S. geography, it is safe to assume that it is typically dry and hot in the U.S. southern states.

{Hint: Identify three aspects: (1). How does falling wheat price affect supply of cereal, if there is any effect at all. (2) How does falling wheat price affect demand for cereal in the U.S. -- if there is any effect at all. (3) What happens with the equilibrium quantity and price on the market for cereal. it might help to draw a graph to answer the question -- you don't need to upload that graph.]

Reference no: EM131171785

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