Question

In 2010, Russia was affected by a significant draught. Russia is a major producer and exporter of several agricultural commodities. As a result of the draught, Russia reduced some of its agricultural exports. In the context of the world supply/demand model for the affected agricultural commodities, we should observe:

• A. Reduced demand and reduced supply
• B. Reduced supply and unchanged demand
• C. Reduced supply and increased demand
• D. Increased supply and unchanged demand

Answer 1

The correct option is B

Reduced supply and unchanged demand

Reduced supply and unchanged demand will be observed because agricultural goods are necessities and their demand is unaffected by natural calamaties. Only the supply will reduce.