If the price of floor rises, then bread

Analyze the question: "Floor" here is a typo for "flour," the main raw material (input) for making bread. We need to find what happens to bread's demand or supply curve when the price of flour rises.

Concept: The price of an input is a determinant of supply. It is not a determinant of demand for the product itself.

• If the cost of inputs rises, the cost of production rises, and profit falls at each price. Producers supply less at every price, so the supply curve shifts to the left.
• If input costs fall, the supply curve shifts to the right.

A change in the product's own price causes a movement along the curve. A change in input cost (or technology, taxes, number of sellers) shifts the supply curve.

Solution:

1. Flour is an input in bread production.
2. A rise in flour price raises bakers' cost of production.
3. Bakers can profitably supply less bread at each price level.
4. The supply curve of bread shifts leftward (a decrease in supply).

Checking the options:

• A: Wrong. Demand does not shift because of an input price, and supply would shift left, not right.
• B: Correct. Supply shifts to the left.
• C: Wrong. A rightward shift would mean increased supply, which happens when costs fall.
• D: Wrong. Supply does change, and demand does not shift because of this.

Exam tip: Remember "Cost up, supply left; cost down, supply right." Whenever a question mentions the price of raw materials, wages, or taxes on producers, think supply curve first. Only think demand curve for changes in income, tastes, population, or prices of substitutes and complements.