Illustrating graphically and specifying the assumptions upon which your reasoning is based, describe briefly (1) The effects on the price and output of fresh maize of adverse weather conditions. (2) The effects on the price and how output of oranges of an increase in consumer's income.
1) The effects on the price and output of fresh maize of adverse weather conditions:
Assumptions:
- Adverse weather conditions such as drought, excessive rainfall, or storms affect the growth and production of fresh maize.
- The demand for fresh maize remains constant.
Illustration:
If adverse weather conditions occur, the supply of fresh maize is likely to be affected. This can be illustrated by a leftward shift in the supply curve from S1 to S2.
Graphically, the leftward shift in the supply curve indicates that at each price level, the quantity supplied of fresh maize will decrease. This is shown as a decrease in output, indicated by a movement along the demand curve from point A to point B.
As a result, the price of fresh maize would increase due to the reduced supply. This is shown as an upward movement along the demand curve from point A to point C. The increase in price is a reflection of the scarcity of fresh maize caused by adverse weather conditions.
In summary, adverse weather conditions reducing the supply of fresh maize would lead to a decrease in output and an increase in price.
2) The effects on the price and output of oranges of an increase in consumer's income:
Assumptions:
- Oranges are a normal good, meaning an increase in consumer income leads to an increase in demand for oranges.
- The supply of oranges remains constant.
Illustration:
If consumer income increases, the demand for oranges is likely to increase. This can be illustrated by a rightward shift in the demand curve from D1 to D2.
Graphically, the rightward shift in the demand curve indicates that at each price level, the quantity demanded of oranges will increase. This is shown as an increase in output, indicated by a movement along the supply curve from point A to point B.
As a result, the price of oranges would also increase due to the increased demand. This is shown as an upward movement along the supply curve from point A to point C. The increase in price reflects the scarcity of oranges caused by the higher demand resulting from increased consumer income.
In summary, an increase in consumer income leading to increased demand for oranges would result in an increase in output and an increase in price.