The world’s largest instant-noodle maker said soaring wheat prices have forced noodle prices up. Despite the rising price, Asia’s middle class, with their increasing incomes, are eating more wheat products as they try to diversify their diets from rice and save time with processed foods.
a. Explain the effect of soaring wheat prices on the market for noodles, other things remaining the same.
b. Explain the effect of the middle class switching its diet from rice to noodles on the market for noodles, other things remaining the same.
c. Explain the combined effect of soaring wheat prices and rising incomes on the equilibrium price and quantity of noodles.
d. As the middle class in Asia continues to grow, how might the price of rice change?