Answer to Question #314856 in Microeconomics for Bongi

Question

The population in Country C decrease 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 for vegetables will be affected by these changes. Clearly indicate how the equilibrium price and equilibrium quantity will be affected by these changes. Make use of a combination of diagrams and verbal explanation to explain your answer.

Answer 1

Reduction in the population will result to a shift in demand curve inwards since the demand reduces.An increase in the price of fertilizer has an adverse effect on the amount of fertilizer supplied to the market since farmers are not able to afford what they could initially afford before the prices hiked. Thus, supply also reduces.

Since demand and supply both drop, there will be a negligible reduction in price and a significant drop in the quantity demanded.

With the graphical representation above, the above phenomenon is explained.