Answer to Question #252019 in Microeconomics 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

Flood destroy the crop of watermelon which indicates shortage of supply.

As well as consumers taste watermelon it demand increases.

DD = demand curve

SS = supply curve

O = equilibrium

OP = equilibrium price

OQ = equilibrium quantity

Decrease in supply will shift the supply curve leftward. Increase in demand will shift the demand curve rightwards.