Question

I Found a Answer but I want another answer !! please answer

1. During September 2020, due to the very hot weather, the production of tomatoes in the local market in Gaza decreased by 60%. Explain the effect of this factor on the market equilibrium of tomatoes ? using graph

2. Due to the financial crisis the income of government's employees has decreased by 50%, at the same time the number of frozen meat's sellers increased by 20%. Explain the effects of these changes on the market equilibrium of frozen meat? Using graph?

3. During September 2020, The Government in Gaza imposed a price ceiling of 2.5 sheqle per KW of electricity. The electricity generators' investors in the Gaza Strip have rejected this decision which had negative impacts on the quality of services provided to the people. Explain the effects of this policy on the electricity market? Using Graph ?

Answer 1

a)Production of tomatoes decreased by 60%, which means that the supply of tomatoes decreased by 60% but the demand for tomatoes are the same.

Due to decrease in supply, the supply curve will shift leftwards.

As you can see in the figure, the orginal demand and supply curve intersect at E, making equilibrium with quantity OQ and price OP.

Due to decrease in production, supply curve shifts from SS to S1S1, demand curve remaining the same DD.

The equilibrium shifts from E to E1, which leads to decrease in price from OP to OP1 and decrease in quantity from OQ to OQ1.

b) Decrease in income of government employees y 50%

Increase in number of sellers by 20%

In this case, since the purchasing power of consumers have decreased but on the other hand, due to increase in number of sellers, the goods in the maket will be more than the number of people wanting to purchase it.

Due to this, the demand curve will shift leftwards, due to decrease in their income.

Supply curve will shift rightwards due to increase in number of sellers.

In the diagram, you can see that the initial demand curve and supply curve (DD and SS) meet at point E making equilibrium quantity as OQ and equilibrium price as OP.

Percentage change in demand(50%) > Percentage change in supply(20%)

Therefore, demand curve shifts leftwards from DD to D1D1 and supply curve shifts rightwards from SS to S1S1, meeting at new equilibrium point E1, with new price OP1 and new quantity OQ1.

As you can see in the diagram , the equilibrium quantity has decreased whereas the price has increased.

And percenatge increase in price is more than the percentage decrease in quantity.

c) In this case, the government imposed a price celing but the the company (Gaza strip) rejected it and did not set the price accordingly, and that turned out as a negative point and the quality of services decreased.

Firstly, price ceiling is the price imposed by the government which means, they set the highest price of a commodity at whoch a supplier can sell and not beyond that. It is a way of saving the consumers from unnecessary high prices.

In the question, it is mentioned that Gaza strip did not adhere to the regulations and as a result their quality of services decreased, due to which the demand of their product will automatically decrease.

Due to decrease in demand, demand curve will shift leftward, no change in supply.

At the initial equilbrium where DD and SS met, the equilibrium quantity was OQ and price was OP, but due to leftward shift in demand curve from DD to D1D1, the equilibrium quantity decreased from OQ to OQ1 and price increased from OP to OP1.