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 increase in consumers income
i. The effect on the price and output of fresh maize of adverse weather conditions:
Assumption: Other factors affecting the price and output of fresh maize remain constant.
Graphical illustration:
Let's assume that the price and output of fresh maize are determined in a simple supply and demand model. The graph has price (P) on the y-axis and quantity (Q) on the x-axis.
- The initial supply curve (S1) represents the normal weather conditions.
- The initial demand curve (D) represents the demand for fresh maize.
- The equilibrium point (E1) represents the original price (P1) and quantity (Q1) of fresh maize.
Now, if adverse weather conditions occur, such as drought or heavy rainfall, it will affect the supply of fresh maize.
- The supply curve will shift to the left (from S1 to S2) due to the decrease in the quantity supplied.
- The new equilibrium point (E2) will show a higher price (P2) and a lower quantity (Q2) of fresh maize.
This implies that adverse weather conditions lead to a higher price and a lower output of fresh maize. Farmers may face challenges in growing and harvesting maize, resulting in a reduction in supply and higher prices in the market.
ii. The effects on the price and output of oranges of an increase in consumer's income:
Assumption: Other factors affecting the price and output of oranges remain constant.
Graphical illustration:
Let's assume that the price and output of oranges are determined in a simple supply and demand model. The graph has price (P) on the y-axis and quantity (Q) on the x-axis.
- The initial supply curve (S) represents the supply of oranges.
- The initial demand curve (D1) represents the demand for oranges based on the consumer's income.
Now, if there is an increase in the consumer's income, it will affect the demand for oranges.
- The demand curve will shift to the right (from D1 to D2) due to the increase in consumer's income.
- The new equilibrium point (E2) will show a higher price (P2) and a higher quantity (Q2) of oranges.
This implies that an increase in consumer's income leads to a higher price and a higher output of oranges. As consumers' purchasing power increases, they are willing to spend more on oranges, resulting in an increase in demand and higher prices in the market. Producers may respond to this increased demand by increasing their output of oranges.