Question

Illustrating graphically and specifying the assumptions upon which your reasoning is based briefly
1) the effect on the price and output of fresh maize of adverse weather conditions.
2) the effect on the price and output of oranges of an increase in consumer income.

Answer 1

1) Graphically, the effect of adverse weather conditions on the price and output of fresh maize can be illustrated as follows:

- The demand curve for fresh maize shifts to the right, indicating an increase in demand due to population growth or other factors.
- However, the supply curve for fresh maize shifts to the left, indicating a decrease in supply due to adverse weather conditions such as drought or floods.
- The intersection of the new demand and supply curves determines the new equilibrium price and quantity of fresh maize.
- The price of fresh maize is likely to increase due to the decrease in supply, while the output or quantity supplied is likely to decrease.

Assumptions:
- The assumption is that adverse weather conditions only affect the supply side and not the demand side of fresh maize.
- There are no major substitutions available for fresh maize, meaning consumers cannot easily switch to other commodities in response to price increases.
- The analysis assumes that the weather conditions are temporary and their impact on the supply of fresh maize would be resolved within a specific timeframe.

2) Graphically, the effect of an increase in consumer income on the price and output of oranges can be illustrated as follows:

- The demand curve for oranges shifts to the right, indicating an increase in demand due to higher consumer income.
- The supply curve for oranges remains unchanged, assuming that the increase in consumer income does not affect the supply side of oranges.
- The intersection of the new demand and supply curves determines the new equilibrium price and quantity of oranges.
- The price of oranges is likely to increase due to the increase in demand, while the output or quantity supplied is likely to increase as well.

Assumptions:
- The assumption is that the increase in consumer income leads to a proportional increase in the demand for oranges, with no significant changes in consumer preferences or tastes.
- The supply of oranges remains constant or is able to adjust quickly to meet the increased demand without facing any production constraints or bottlenecks.
- There are no substitute goods for oranges that consumers can easily switch to if the price increases.