In February 2017, Europe had a shortage of fresh vegetables because of bad weather. For some time, the markets for several vegetables, such as broccoli and lettuces, were out of equilibrium. Food prices usually vary more than the prices of manufactured goods and services. These variations affect the inflation rate.
(a)[2]
When does a market reach equilibrium?
(b)[4]
Explain how a rise in the price of food would affect a country's consumer prices index (CPI).
(c)[6]
Analyse, using a demand and supply diagram, how bad weather is likely to influence the market for broccoli.
(d)[8]
Discuss whether or not a higher inflation rate will help producers.
Worked solution & mark scheme
This 20-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Quantity demanded is the same as quantity supplied” …