Question

Suppose that a natural disaster substantially increases the cost of producing cheese. we would predict that the equilibrium quantity of cheese will ________ and the equilibrium price of cheese will ________.

Answer 1

Suppose that a natural disaster substantially increase the cost of producing cheese, we would predict that the equilibrium quantity of cheese will decrease and the equilibrium price of cheese will increase because natural disasters can have a negative effect on the supply of the cheese. So, using the supply and demand curve, this will cause the supply to shift left while making demand curve steady since the effect will be on the supply part and not affecting the demand of the cheese.