Suppose that in the rice market demand shifts due to a new rice diet that is being marketed in the U.S. as a cure for cancer. Si
1 answer:
Answer:
The equilibrium price will increase
Explanation:
Equilibrium price is defined as the price at which the quantity demanded and quantity supplied are equal.
At this point there is no excess demand or supply, they are both equal.
I'm the given scenario the new rice diet that is being marketed in the U.S. as a cure for cancer will lead to increase in demand for rice.
While a flood that affects the rice crop in California will reduce the ability of suppliers to supply. Leading to reduced quantities supplied to the market.
This results in increased prices for the now scarce rice in the economy
It is illustrated in the attached diagram where price increases from P1 to P2.
The new equilibrium quantity is Q1
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