Illustrating graphically and specifying the assumptions upon which your reasoning is based, describe briefly
I. The effect on the price and output of the fresh maize of adverse weather conditions.
II. The effect on the price and output of oranges of an increase in consumers income.
I. Effects of adverse weather conditions on the price and output of fresh maize:
Assumptions:
1. The market for fresh maize is perfectly competitive, meaning there are many buyers and sellers with no individual ability to influence the price.
2. The demand for fresh maize remains constant, regardless of weather conditions.
3. The supply of fresh maize is directly affected by weather conditions, with adverse weather conditions reducing the output.
Graphic representation:
The graph would have the quantity of fresh maize on the x-axis and the price on the y-axis. The supply curve would be downward sloping to represent the relationship between quantity supplied and price. An adverse weather condition would shift the supply curve upwards, indicating a decrease in the quantity supplied at each price point.
Explanation:
Adverse weather conditions, such as drought or heavy rainfall, can negatively impact the production of fresh maize. This can lead to a decrease in the overall supply of fresh maize, causing a shift in the supply curve to the left. As a result, the equilibrium price of fresh maize would increase, indicating a higher cost for buyers. Additionally, the quantity of fresh maize available in the market would decrease, leading to a reduction in output.
II. Effects of an increase in consumers' income on the price and output of oranges:
Assumptions:
1. The market for oranges is perfectly competitive.
2. Oranges are a normal good, meaning that as consumers' income increases, their demand for oranges also increases.
3. The supply of oranges remains constant.
Graphic representation:
The graph would have the quantity of oranges on the x-axis and the price on the y-axis. The demand curve would be upward sloping to represent the relationship between quantity demanded and price. An increase in consumers' income would shift the demand curve to the right, indicating a higher quantity demanded at each price point.
Explanation:
When consumers' income increases, they have more purchasing power, and their demand for oranges is likely to increase. This leads to a shift in the demand curve to the right. As a result, the equilibrium price of oranges would increase, indicating a higher cost for buyers. The quantity of oranges demanded would also increase, leading to an expansion in output to meet the higher demand.