Answer to Question #160027 in Macroeconomics for Labib

Question

The prices of onion are likely

to increase in the country

again as a fallout of its price

hike in India.Now answer the

following questions.

a. Which curve will be affected, AD

or AS?

b.What will be the new equilibrium

price?

C.Write your personal observatiion.

Answer 1

a. The AC curve will shift to the right since as the price rises, there will be more producers willing to sell onions at a higher price.

b. What the new equilibrium will be lower than the previous one since the price will be higher.

C. Onion prices depend on the season and whether the weather was rainy or not. If it rains, the onions quickly deteriorate and are sold at a lower price.