Illustrating graphically and specifying the assumptions upon which your reason is based, describe briefly
i. The effect on the price and output of fresh maize of adverse weather conditions.
ii. The effects on the price and output of oranges of an income.
i. The effect on the price and output of fresh maize of adverse weather conditions:
Assumption: Adverse weather conditions such as drought or heavy rainfall can affect the production of fresh maize.
Graphically, we can illustrate the effect of adverse weather conditions on the price and output of fresh maize using a supply and demand graph.
Assuming that initially, the market for fresh maize is in equilibrium with a certain price and quantity (P1 and Q1), the supply curve (S) would represent the relationship between the quantity supplied and the price of fresh maize. The demand curve (D) would represent the relationship between the quantity demanded and the price of fresh maize.
In the case of adverse weather conditions, such as a drought, the supply of fresh maize would be negatively impacted. This means that the supply curve (S) would shift to the left, indicating a decrease in the quantity supplied at each price level (S2). As a result, the market equilibrium would shift to a new price and quantity (P2 and Q2).
Moreover, the decrease in supply would lead to a higher equilibrium price of fresh maize, as the quantity supplied becomes less than the quantity demanded. This price increase (P2) would be accompanied by a decrease in the quantity demanded (Q2).
ii. The effects on the price and output of oranges of an income:
Assumption: Changes in income levels can impact the demand for oranges.
Graphically, we can illustrate the effect of income changes on the price and output of oranges using a demand curve.
Assuming that initially, the market for oranges is in equilibrium with a certain price and quantity (P1 and Q1), the demand curve (D) would represent the relationship between the quantity demanded and the price of oranges.
If there is an increase in income, consumers would have a higher purchasing power, leading to an increase in the demand for oranges. This would cause the demand curve to shift to the right (D2), indicating a higher quantity demanded at each price level.
As a result, the market equilibrium would shift to a new price and quantity (P2 and Q2). The increase in demand would lead to a higher equilibrium quantity of oranges, as the quantity demanded exceeds the quantity supplied. This increase in demand (Q2) would be accompanied by a higher price (P2).
Conversely, if there is a decrease in income, the demand for oranges would decrease, causing the demand curve to shift to the left. This would result in a lower equilibrium quantity and price of oranges. Therefore, changes in income levels can have a significant impact on the price and output of oranges.