Answer to Question #183644 in Microeconomics for Nellie Ndala

Question

The floods, that destroyed part of the lettuce crop, would have caused the equilibrium price of spinach to _______ and the equilibrium quantity of spinach to _______Use graphs throughout to illustrate your answers (3 marks)

(a) decrease; decrease

(b) decrease; increase

(c) increase; increase

(d) increase; decrease

Answer 1

(c) increase; increase

Lettuce crop and spinach are substitutes. When the supply of lettuce crop decreases, the equilibrium price spinach will rise from p₁ to p₂ and quantity of will increase from Q₁ to Q₂ due to increased demand from D₁ to D₂ .