Question

1. Show the market for potatoes on a graph and show what will happen if there is a drought in Idaho (where a lot of potatoes are grown). b. On another graph, show what will happen in the market for potatoes if there is a drought in China (where, I presume, a lot of rice is grown). Note: I am assuming that there is one potato market and it is international. In other words, do not assume that there is a Chinese market and an American market, just one big market. The difference between a drought in China and in Idaho here is only (I'm assuming) that potatoes are grown in Idaho and rice is grown in China. (Assume that no potatoes are grown in China and no rice is grown in Idaho.) This might make you wonder what the drought in China has to do with the potato market. And that, of course, is the point of the question.

Answer 1

1) it can be mentioned that if there is drought in Idaho, then what happens is that the supply of potatoes are reduced so that the supply curve shift to the left as shown in the figure as a result of which the equilibrium price increases and equilibrium quantity decreases

2) similarly if there is a drought in China, what happens is that demand for potatoes from a Idaho increases to China because there is reduction in potatoes from China so that the demand curve shifts to the right as a result of which the equilibrium price and equilibrium quantity increase