Answer to Question #314593 in Microeconomics for Ayushi

Question

Using supply and demand diagrams, explain each of the following statements:

(A) Banning onion exports should decrease the domestic price of onions.

(B) Banning single use plastic will increase the price of cloth bags

Answer 1

A) The reason is that the ban on exports means that more goods are available for the domestic market. This in turn creates an excess supply of onions in the domestic market. As a result domestic prices decrease.

B) The reason is that the of single-use plastic, will lead to no supply, but lead to an increase in the production of cloth bags. This, in turn, creates a limited supply and a high demand, thus

an increase in the prices of cloth bags.