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ACCA Applied Knowledge · Business and Technology · Microeconomic factors

A farmer notices that a poor harvest has reduced the quantity of wheat available, while consumer demand is unchanged. Which statement best describes what happens in the wheat market?

The supply curve shifts left, which raises the equilibrium price. As price rises, consumers reduce the quantity they demand, a movement along the unchanged demand curve. Demand itself has not changed, so the demand curve does not shift.

  1. ASupply shifts left, the equilibrium price rises and quantity demanded falls along the demand curveCorrect
  2. BDemand shifts left, the equilibrium price falls
  3. CSupply shifts right, the equilibrium price falls
  4. DBoth curves shift left, leaving the price unchanged

Explanation

A poor harvest reduces supply at every price, shifting the supply curve left. With demand unchanged, price rises and consumers move up their demand curve, buying a smaller quantity. Demand itself does not shift because only a price change causes this movement.

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