Answer to Question #267120 in Microeconomics for lucas

Question

Explain how an increase in the price of organic onions can affect the supply of organic tomatoes that use the same land to grow. How will this affect the equilibrium price and quantity of organic tomatoes?

Answer 1

The same technique is used to grow organic onions and organic tomatoes. Organic farmers would now grow more onions and less tomatoes if the price of organic onions rose. They'll use onions instead of tomatoes because onions are more expensive. As a result, the supply of organic onions will grow. As a result, the availability of organic tomatoes will be reduced. This will cause the supply curve for organic tomatoes to move to the left.

The supply curve would move leftward from S1 to S2. Equilibrium price and quantity for organic tomatoes was P1 and Q1 respectively. Equilibrium price for organic tomatoes will increase from P1 to P2 and equilibrium quantity will reduce from Q1 to Q2