Illustrating graphically and specify the assumption upon which your reasoning is based describe briefly:
1 The effect on the price and output of fresh maize of adverse weather conditions.
2 the effects on the price and output of oranges of an increase in consumers income.
1. Effect on the price and output of fresh maize due to adverse weather conditions:
Graph:
Price
^
|
| S2
| /
| /
| /
| /
| / S1
| /
| /
| /
| /
| /
| /
| /
+---------------------------------------------------> Output
Explanation:
The graph depicts the relationship between the price and output of fresh maize in response to adverse weather conditions.
- The supply curve (S1) represents the normal supply of fresh maize, where the price is inversely proportional to the level of output. As output increases, the price decreases.
- However, when adverse weather conditions occur, such as drought or floods, the supply curve shifts to the left (S2). This signifies a decrease in the overall supply of fresh maize.
- As a result, the equilibrium price increases, and the equilibrium output decreases. The intersection of the new supply curve (S2) and the demand curve determines the new equilibrium price and output levels.
Assumption:
- The assumption is that adverse weather conditions directly impact the supply of fresh maize. Other factors such as technology, government intervention, or changes in demand are not considered in this analysis.
2. Effects on the price and output of oranges due to an increase in consumers' income:
Graph:
Price
^
|
| D2
|
| D1
|
|
|
|
|
|
|
|
|
|
+---------------------------------------------------> Output
Explanation:
The graph illustrates the relationship between the price and output of oranges in response to an increase in consumers' income.
- The demand curve (D1) represents the initial level of demand for oranges. As the price decreases, the quantity demanded increases, and vice versa.
- When there is an increase in consumers' income, it leads to a shift in the demand curve to the right (D2). This signifies that consumers are now willing and able to buy more oranges at each price level.
- As a result, the equilibrium price increases, and the equilibrium output also increases. The intersection of the new demand curve (D2) and the supply curve determines the new equilibrium price and output levels.
Assumption:
- The assumption is that the increase in consumers' income directly affects their demand for oranges. Other factors such as preferences, availability of substitutes, or changes in supply are not considered in this analysis.