1. reducing world output of wheat.
2. reducing the world price of wheat.
3. both of the above.
4. none of the above.
Choose the option that yields the correct answer.
The correct answer is option 3 . Technological innovation in world rice production shifts the supply curve of rice downward. This lowers the price of rice and induces consumers to consume more rice and less substitute staple crops, one of these being wheat. The world demand for wheat thus shifts to the left and the world price of wheat falls. This is shown in in the Figure below.
The supply curve of rice shifts downward as a result of the introduction of new high-yielding varieties. This lowers the price of rice and causes consumers to substitute it for wheat to some degree. The world demand curve for wheat thus shifts to the left and the world market price and quantity of wheat fall.