Answer to Question #252016 in Macroeconomics for Sophy

Question

Explain and show graphically, what happens to the equilibrium price and quantity if a flood destroys much of the water melon crop in Belize and, at the same time, consumer tastes shift toward water melon juice. What would we expect to happen to the equilibrium price and quantity in the market for water melon juice?

Answer 1

Since the flood has destroyed the melon crop the supply of melon will decline. Due to a decline in the supply of melon equilibrium price of melon will go up and the equilibrium quantity will decrease.

Graphical presentation:

Due to decreased supply of water melon which are the resources in melon juice production, the quantity of melon juice supplied will also reduce thereby rising the equilibrium price as the equilibrium quantity lowers