Answer to Question #315162 in Macroeconomics for Boity

Question

Explanation of Graph showing decrease in a population and increase of fertilizers

Answer 1

a)

The graph below shows the effects of the decrease in population on the equilibrium market of vegetables.

A decrease in population leads to a decrease in the number of customers of vegetables. This causes a shift of the demand curve to the left. The equilibrium price of vegetables falls from point P₀ to P₁ while equilibrium quantity decreases from Q₀ to Q₁. Hence a fall of the market equilibrium.

b)

The graph below shows the effects of the increase in the cost of fertilizers on the equilibrium market of vegetables.

An increase in the cost of fertilizers increases the cost of production which leads to a decrease in supply. This causes the supply curve to shift to the left. The equilibrium price of vegetables rises from P₀ to P₁ while equilibrium quantity decreases from Q₀ to Q₁.