In February 2017, Europe faced a temporary shortage of fresh vegetables because of bad weather. During that period, the markets for several vegetables, such as broccoli and lettuces, were not in equilibrium. Food prices usually vary more than the prices of manufactured goods and services, and these variations affect the inflation rate.
(a)[2]
At what point is a market in equilibrium?
(b)[4]
Explain the effect of a rise in food prices on a country’s consumer prices index (CPI).
(c)[6]
Analyse, using a demand and supply diagram, the likely effect of bad weather on the market for broccoli.
(d)[8]
Discuss whether a higher inflation rate will or will not benefit producers.
Worked solution & mark scheme
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