Microeconomics and Macroeconomics Answer 2022

Running head: Microeconomics and Macroeconomics
Microeconomics and Macroeconomics
Name of the Student
Name of the University
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Microeconomics and Macroeconomics
1
Table of Contents
Part A...............................................................................................................................................2
Answer 2......................................................................................................................................2
Answer 3......................................................................................................................................4
Answer 4......................................................................................................................................6
Part B...............................................................................................................................................8
Answer 8......................................................................................................................................8
Answer 9......................................................................................................................................9
Answer 11..................................................................................................................................11
References......................................................................................................................................13

Microeconomics and Macroeconomics
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Part A
Answer 2
(a) Increase in consumption of bread increases the demand for bread. As a result the
manufacturers increased production of bread and thus demand for wheat flour increased and the
market demand curve for wheat flour moved right ward to D* in diagram 2 and to meet the
increased demand and thus the supply of wheat flour increases. The supply curve moved to S*
and the market for wheat flour expanded to Q* from Q.
Diagram 1: Increased consumption of bread
Source: (Created by the Author)

Microeconomics and Macroeconomics
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(b)
Diagram 2: Discovery of cheaper way of milling
flour
Source: (Created by the Author)
Discovery of innovative and inexpensive way of flour milling process will increase the
productivity of the industry and thus with same amount of factors or production the firms will be
able to produce more amount of wheat flour (Knittel & Pindyck, 2016). As a result the supply
curve of the wheat flour market moves rightward to S* from S and the quantity supplied surges
from Q to Q* and price fell to P* from P.
(c)
Diagram 3: Price of grains rises
Source: (Created by the Author)
Increase in price of grains surges the cost of production of wheat flour milling and thus
the supply of the market reduces causing leftward movement of supply curve from S to S1.