Question

Assume pears are sold in a perfectly competitive market, using a supply and demand graph, describe the impact, ceteris paribus, of a bumper crop on equilibrium price and output? In your discussion make sure to explain the process of moving to the new equilibrium output and price.

Answer 1

If pears are sold in a perfectly competitive market a bumper crop will increase supply of pears, which will decrease equilibrium price and increase equilibrium output, because the supply curve will shift to the right.