Answer to Question #309765 in Microeconomics for Hey

Question

The population in countrv C decreases. due to a lower birth rate. At the same time, there is an increase in the

cost of fertilizer, which is used to grow vegetables. Explain how the market tor vegetables will be attected by

these changes. Clearly indicate how the equilibrium price and equilibrium quantity will be affected by these

changes. Make use or a combination or diagrams and verbal explanation to explain vour answer. Note that Vour

diagrams should be properly annotated and that marks will be deducted for any missing labels on our diagram.

Answer 1

The decreasing population due to a low birth rate leads to low demand for vegetables (from Q₀ to Q₁). This phenomenon causes the demand curve to shift from D₀ to D₁ as shown below. Therefore, the equilibrium price shifts from P₀ to P₁ meaning the vegetable prices decrease.

On the other hand, the increase in the cost of fertilizer means that the production costs of vegetables increase. As a result, fewer farmers will be able to produce the product, meaning the market supply will decrease from S₀ to S₁. The equilibrium will shift from E₀ to E_, meaning that the suppliers will sell the vegetables increase at higher prices (from P₀ to P₁) as shown below.