Your outcome is more probable. A good example is Hollywood video and blockbuster video when they lost sales their prices increased pretty drastically. At the same time food prices in the past have tended to reflect public demand, gas prices, and even price of grain. The bacon industry also has more competition than video rental locations; so, it could go either way.
According to the principles of economics, the price would drop if demand went down. Although the price might go up in the short run, in the long run, it would drop. Also, the supply of bacon would drop.
>doesn't understand basic things like supply/demand relationship