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ECON Suppose that severe floods destroyed farms, homes, and businesses in the Midwest. Use the aggregate...

ECON

Suppose that severe floods destroyed farms, homes, and businesses in the Midwest. Use the aggregate demand/aggregate supply model, to explain the changes you would expect to take place and the effects you would expect these floods to have on both output and prices

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Due to flood people demand more commodity and due to this demand curve shifted towards right , here in the area of flood as transportation facility is not available so there will be shortage of supply of commodity . here first demand curve shifted towards right and equilibrium shifted from E1 to E2 and price increases from P1 to P2 , and quaantity demanded increases from Q1 to Q2 . Due to shortage of commodity avialable supply curve shifted from S1 to S2 and equilibrium shifted from E2 to E3 . . As a result price increases and quantity decreases .

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