Supply of product decreases due to flood. Explain the chain of effects of this change on mkt equilibrium
Dear Student
Please find below the solution to your query
1. A fall in supply during the time of natural calamity like flood, will shift the supply curve to the left or there will be a backward shift in the supply curve due to the damage by flood.
2. This would lead to excess demand at the initial equilibrium level. As a result, the buyers will compete and will be ready to pay higher, and as a result, the equilibrium prices will increase with a fall in the equilibrium quantity.
Regards
Please find below the solution to your query
1. A fall in supply during the time of natural calamity like flood, will shift the supply curve to the left or there will be a backward shift in the supply curve due to the damage by flood.
2. This would lead to excess demand at the initial equilibrium level. As a result, the buyers will compete and will be ready to pay higher, and as a result, the equilibrium prices will increase with a fall in the equilibrium quantity.
Regards