Question

Graphically show and explain the effect of the shift of either demand or supply curve or the shift of both on the market equilibrium price and quantity for each of the following events. c. Consider the market for brown rice and assume that this market is initially in equilibrium. Suppose that there is an increase in income and that brown rice is an inferior good. At the same time there is a decrease in the number of farmers producing brown rice. What happens in the market for brown rice given that the effect of the increase in income is stronger?

Answer 1

Answer on Question # 71354, Economics / Microeconomics

Consequently, provided that the effect of increasing the income is stronger, it can be argued that the price and demand for this product will decrease. After all, with the increase in income, the price level will decrease, and with the decrease in the number of farmers on the contrary, the supply curve will shift to the left, and the price level will increase, but the effect of increasing the income is stronger.

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