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CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics

Which event would, other things being equal, lead to a fall in the equilibrium price of wheat flour with an increase in the equilibrium quantity?

An improvement in milling technology that cuts costs. It shifts the supply curve to the right, so the equilibrium price falls and the quantity traded increases. Higher input costs or taxes reduce supply, while weaker preferences reduce demand and lower quantity as well.

  1. AA rise in the price of wheat used as input
  2. BA fall in consumers' preference for flour
  3. CAn improvement in milling technology reducing costsCorrect
  4. DA government tax on flour sales

Explanation

Better technology lowers production costs and shifts the supply curve rightward, giving a lower price and a larger quantity. A costlier input or a tax shifts supply left, raising price. Reduced preference shifts demand left, lowering both price and quantity.

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