A rice-growing region has an unusually large harvest. Traders report that the supply of rice has increased, while households' income and preferences are unc...
Question 1 Report
A rice-growing region has an unusually large harvest. Traders report that the supply of rice has increased, while households' income and preferences are unchanged.
(a) Which change is most likely in the market price of rice? [1]
(b) Explain the likely change in the quantity of rice purchased. [1]
Answer Details
(a) The market price of rice decreases. [1]
The unusually large harvest increases supply. Since household income and preferences are unchanged, demand does not shift. Greater supply puts downward pressure on the equilibrium price.
(b) Quantity purchased increases because the lower price causes an increase in quantity demanded. [1]
This is a movement along the unchanged demand curve: consumers buy more because rice is cheaper.
Download The App On Google Playstore
Everything you need to excel in your exams
