Victoria is the food basket for Australia. In 2017, Victoria witnessed a severe drought that is reported to be the worst in many years. Assume all factors constant meaning that there is no external influence in the market except the drought.

(a)Use the demand and supply model figure below to explain the impact of the drought on food supply to Northern Territory, a state that relies on food supplies from Victoria.

Ss2

Q4

P4E1

P3Q2Ss1

P2EQ

P1DD1

(a)Suppose in 2019 to promote food production, the Federal Government of Australia provided high technology equipment to facilitate irrigation. Assume Victoria supplies machinery and food, use a production possibility frontier (PPF) to explain the impact of high technology equipment for irrigation on food supply in Australia. (2marks)

Victoria food and machinery production possibility frontier