Question

You are an orange seller. You observe that prices of oranges in other stores increase. Should you try to get more oranges from farmers to sell? Explain briefly. (This question is related to a problem of inflation.)  

Answer 1

If prices of orange increased by other stores, as a retailer I will tried to get more oranges from farmers to sell. But this high price in the market will induce the producers and retailers to sell more gods in the market. The supply of orange will depends on the price. The fundamental law of supply states that the supply will increase with respect to the rise in price. The profit of the orange producers increased with this rise in price. In consumer perspective this rise in price will lead to a fall in demand of orange. There is a chance for cost push inflation.  

The rise in the production cost of orange will increase the burden of consumers. This will shift the supply curve. This will increase the wage rate of the orange farmers. This rise in wage cause cost push inflation. If the price of orange by other firms raised the price of raw materials also increased. There is high tax implemented over the consumers by the producers of orange. This will increase the tax burden of the consumer and it will affect the consumption pattern of consumers with high inflation period.