The graph below illustrates the effect of adverse weather conditions on the price and output of fresh maize.
Assumptions:
1. Adverse weather conditions such as drought or excessive rainfall can negatively affect the growth and yield of maize crops.
2. The demand for fresh maize remains constant.
3. The market for fresh maize is in equilibrium before the adverse weather conditions strike.
Graph:
Price
|
|
P1 | ----/
| /
| /
P0 | /
| /
| /
|-----------------------
| Q
|
|
|
|
|
|____________________________
Output
Explanation:
Before the adverse weather conditions, the market is in equilibrium at point E, where the supply curve (S0) intersects with the demand curve (D), resulting in an equilibrium price (P0) and output (Q).
When adverse weather conditions occur, the supply of fresh maize decreases due to the negative impact on crop growth and yield. This leads to a leftward shift in the supply curve from S0 to S1. As a result, the equilibrium price increases from P0 to P1, indicating a higher cost of fresh maize in the market.
Simultaneously, the decrease in supply also reduces the quantity of fresh maize available in the market. This is depicted by a movement along the demand curve (D) from point E to a new equilibrium point, with a lower output level, represented by Q.
Overall, adverse weather conditions cause a decrease in the supply and output of fresh maize, leading to an increase in price.
Illustrating graphically and specifying the assumptions upon which your reasoning is based describe briefly the effect on the price and output of fresh maize of adverse weather conditions. Show on the graph
1 answer
1 answer