Why do millers and bakers benefit from the production decision of Canadian farmers?
Millers and bakers who buy spring wheat benefit because the price of spring wheat ___________ and ____________ received by the millers and bakers increases.
Wrong! - How would the production decision of Canadian farmers influence the price of spring wheat? How would it influence the consumer and producer surplus? Are millers and bakers producers or consumers of spring wheat?
Well Done! - Millers and bakers are consumers of spring wheat. As Canadian farmers switch land from canola to spring wheat production, the supply of spring wheat increases, bringing a fall in price. Consumers buy a higher quantity of spring wheat at a lower price. Consumer surplus increases.
Both canola and wheat spring can be produced using the same resources, such as the same farmland and farm labor.
