Volcanic eruption effect the market equilibrium in New Zealand

          Volcanic eruption had erupted in New Zealand on Thursday. According to the volcanologist, the volcanic is expected to be erupting again at any time during the next few weeks. Due to the volcanic eruption, many crops such as fruits, vegetables, and wheat have been destroyed. So, volcanic eruption had affected the market equilibrium in New Zealand.

            Market equilibrium is a state of balance where the quantity supplied equals to quantity demanded. When the demand for food in New Zealand is in shortage, which is a situation that consumer are willing to buy more than the producers are willing to sell, the price of food will increase. Higher demand leads to higher equilibrium price and higher equilibrium quantity. In this case, the demand curve will shift to the right. The graph below shows the demand curve shift to the right.

          When the crops are destroyed by the volcanic eruption, there are not enough of resources to produced food. Therefore, the supply for food will be lower. Lower supply leads to higher price and lower quantity exchanged. And so, the supply curve will shift to the left. The graph below shows the supply curve shift to the left.

                     In conclusion, the volcanic eruption will effect the demand and supply curve for the food so that the price will be equilibrium.

Written by Chai Ching Wan