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ECO11 Principles of Economics | Perfect Competitive Market



A.Assuming tomatoes are sold in a purely competitive market, use the supply and demand diagram to describe, ceteris paribus, a major factor contributing to the price of tomatoes to rise in Australia. In your discussion make sure to explain the process of moving to the new equilibrium output and price.

B.How would this impact other markets in the industry?


A.Using the determinants of price elasticity of demand, discuss whether you think the price elasticity of demand for tomatoes to be elastic or inelastic.

B.Based on your answer in part 2(a), explain and illustrate hypothetically, what should be the effect of the rising price of tomatoes on the total revenue of the tomatoes wholesale market.


A.Considering the fact that many tomato farmers could abandon the industry, explain graphically, the different strategies that government should adopt to sustain the long-term supply of tomatoes.

B.Make sure to discuss the advantages and disadvantages of the strategies you have mentioned.

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