Section A
(You are advised to
spend approximately 20 minutes on this question. You are also advised to make
use of the data provided in your answers.)
1) Spain is the world’s largest producer
of Olive Oil. In 2005, production of olive oil fell due to Spain’s worst
drought since records began. This affected the supply of olive oil produced
through the years 2005-2008.
a. How is the supply of olive oil
affected by the drought (2)
b. Why would the price of olive oil
increase after the drought? Explain your answer (4)
c. Draw a demand and supply diagram to
show:
i.
The
equilibrium price and quantity before the drought(3)
ii.
The
equilibrium price and quantity after the drought(2)
d. Why might consumers buy imported
olive oil, rather than domestic olive oil after the drought? Explain your
answer (6)
ReplyDeletea)The supply of olive oil will decrease because olive crops were destroyed by the drought and due to a lack of olives they can't produce olive oil,supply is the amount of products a producer is willing and able to provide but in this case they can not provide because they lack the resources.
b) 1)there would be a decrease in the supply of olives due to natural disasters therefore the supply of olive oil would decrease causing a shift in the curve to the right. This means to keep the demand and supply equilibrium they would have to increase the price of olive oil to decrease demand and keep market equilibrium
c)- drawn out
D) finish later