Answer to Question #92537 in Economics of Enterprise for Kenalemang

Question

During a drought the prize of maize goes up, when the price of potatoes increases, the price of bread also goes up. Using supply and demand diagrams show the two relationship.

Answer 1

Definitely when there is supply is less but there is the demand is more, then the cost of commodities is increases.

In case of drought, there is less supply of maize as there is less supply of potatoes and bread thus cost varies directly with each other's. Increase the cost of one commodity may result the increase the cost of other