a.Evaluate the following statement: "A farmer is producing wheat (a necessity) on his land. The total production of wheat is Q1 bushels. The price per bushel is $P1. Due to the introduction of new hybrid seed, the farmer's productivity increases, and total production increases from Q1 to Q2. At the same time, the increase in production lowers the price from $P1 to $P2. The introduction of new hybrid seed improves the living standard of the farmer."

b. Assume that the income elasticity of demand for good X is -3.69 and the cross-price elasticity is -1.16. What would happen to demand for X if there is an increase in income and an increase in price of Y at the same time? Explain your answer.

c. How will each of the following events shift the demand and/or the supply curve for bread? Also, indicate the effect of each event on equilibrium price and equilibrium quantity. That is, do equilibrium price and equilibrium quantity rise, fall, or remain unchanged? Or, is the answer indeterminate because it depends on the magnitude of the shift?

i. The price of flour decreases.

ii. Consumer income increases, and bread is a normal good.

iii. The price of lettuce wraps (a substitute of bread) increases, and sellers expect the price of bread to fall next month.

iv. The number of buyers decrease, and consumers expect the price of bread to be higher next month.