What happens in the market for corn if the price of wheat, a substitute in production, decreases?

• A. Demand shifts to the left
• B. Demand shifts to the right
• C. Supply shifts to the left
• D. Supply shifts to the right

Answer: (D)

Verified step by step guidance

1. Identify the relationship between corn and wheat. They are substitutes in production, meaning that producers can switch between producing corn and wheat based on profitability.
2. Understand the effect of a decrease in the price of wheat. When the price of wheat decreases, it becomes less profitable for producers to grow wheat compared to corn.
3. Analyze the producer's response. As wheat becomes less profitable, producers are likely to allocate more resources to the production of corn, increasing the supply of corn.
4. Determine the shift in the supply curve. An increase in the supply of corn due to producers switching from wheat to corn production will cause the supply curve for corn to shift to the right.
5. Conclude the market effect. With the supply curve shifting to the right, there will be an increase in the quantity of corn supplied at each price level, potentially leading to a decrease in the market price of corn if demand remains constant.