Due to favorable weather, a larger than normal crop of grain is produced. This will result in a shift in the:

• A. Supply curve shifts to the right, resulting in a lower price
• B. Demand curve shifts to the right, resulting in a higher price
• C. Supply curve shifts to the left, resulting in a higher price
• D. Demand curve shifts to the left, resulting in a lower price

Answer: (A)

A favorable weather situation increases production, so more grain is supplied at every price. This causes the supply curve to shift to the right. With demand unchanged, the market moves to a new equilibrium with a higher quantity and a lower price. The reason the price falls is simply that the increased supply reduces scarcity; more of the good is available to buyers at each price. The demand side isn’t driven by weather in this scenario, so it doesn’t shift. If demand were to rise, price could rise; if demand fell, price could fall—independent of the production boost described here.