In early 2004, following the toppling of President Aristide,...

In early 2004, following the toppling of President Aristide, the price of a 110 pound sack of rice in Haiti doubled from $$\$ 22.50$$ to $$\$ 45$$ because of disruptions at Haitian ports. (Eighty percent of Haiti's rice is imported.) Demonstrate graphically the effect of the import distuptions on the equilibrium price and quantity of rice purchased in Haiti. $\mathrm{LO} 2$

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Key Concepts

Supply and Demand Model

The supply and demand model is a fundamental framework in economics that illustrates how the interactions between buyers and sellers determine the equilibrium price and quantity of a good. It comprises two curves: the demand curve, which shows the relationship between price and the quantity demanded by consumers, and the supply curve, which shows the relationship between price and the quantity supplied by producers.

Market Equilibrium

Market equilibrium occurs where the supply and demand curves intersect, indicating a balance in the market where the quantity supplied equals the quantity demanded. This equilibrium determines the prevailing market price and the quantity of goods exchanged, and any shifts in supply or demand will lead to a new equilibrium.

Supply Shock

A supply shock refers to an unexpected event that suddenly changes the supply of a product. In the context of the question, import disruptions lead to a leftward shift of the supply curve, which typically results in a higher equilibrium price and a lower equilibrium quantity, as the reduced availability of the product drives up prices while decreasing the amount sold.

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