Answer to Question #265754 in Microeconomics for Abeer

Question

Suppose the market for clean water was initially at equilibrium in Japan. However, the Japanese earthquake and resulting tsunami destroy stores of bottled water and bottled water plants as well as severely damage infrastructure that delivers clean water to Japanese households. How will the market of clean water in Japan respond to this change?

draw a graph

Answer 1

Japan will respond by increasing the price for clean bottled water to reduce the demand for the product because the current equilibrium price will no longer correlate to the market demand and supply.