Answer to Question #182378 in Microeconomics for tayaba

Question

In 2005 Earthquake has devastating effects on the economy. A lot of factories gets

destroyed, many people lost their life. Explain with the help of demand and supply

curves how an earthquake affects the market equilibrium and what is the new

equilibrium price and quantity.

Answer 1

An earthquake decreases both market demand and supply, as a result the equilibrium price will decrease and the equilibrium quantity may either decrease or increase.