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The following headline appeared in the H...

The following headline appeared in the Hindustan Times on `2^(nd)` August, 2014. "Crop damaged in Himachal sent tomato prices roaring in Delhi". Use a diagram and economic theory to analyse the statement.

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When the tomato crop was damaged in Himachal the supply of tomato decreases. This means that the supply curve shifts leftward to `S_(1)S_(1)`. At the prevalling market price (OP), there was an excess demand of AE. In this situation, buyers would competed to raise the market price. As market price would have risen, quantity demanded to tomatoes would have contracted and the quantity supplied would have expanded. This process would have continued till a new equilibrium price was reached at `OP_(1)`, where market demand is equal to market supply. `OP_(1)` is higher thanthe old price to tomatoes. This explains how prices in Delhi rose when the tomato crop got damaged in Himachal.
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