n a particular year the olive harvest was extremely bad Trace the effects of this on
If the olive harvest is bad in a certain year, this means that supplies of olives will be restricted relative to the amounts available in previous years. If we imagine the supply curve of the olive farming industry the year before the bad harvest, we can then relate this to the supply in the year of the bad harvest. The supply curve would shift to the left in the year of the shortage, since there is overall less supply, so then the price at each possible quantity is higher. ... Olive oil is an obvious example of a complementary good that would suffer from a reduction in olive availability. The bad harvest and hence low supply of olives, and the increased expense in actually acquiring olives to make oil, would increase the price of olive oil. ... We have established that a bad harvest would increase the price of olives and their complementary goods, and decrease the demand for them.