Explaining Why does a natural disaster (drought, flood) in an agricultural region almost always result in higher prices for commodities and consumer goods?

The natural disaster in an agricultural region almost always result in higher prices for commodities and consumer goods because there will be low supply to meet optimal demand.

Majorly, a natural disasters like drought and flood can cause damages to agricultural products which are either for consumption or raw materials for production

The region experiencing such frequent flooding and drought will have a reduction in productivity level and when its happens, the supply of agricultural products will fall and the demand will rise.

Based on the law of demand and supply which states "the higher the price, the lower the quantity demanded and vice versa", this will result in the prices of commodities going up.

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Answer and Explanation:

Natural disasters such as these can cause damages to agricultural products Any region experiencing frequent flooding and drought will have a reduction in productivity level. When this happens, the supply of agricultural products in the region will fall and demand will go up. Based on the law of demand and supply, this will result in the prices of commodities going up.

Drought and flood causes loss of livestock, storage problems, transportation issues and a fall in output. An increase in prices is used to cover up for some of these. An increase in input costs also causes price increase.

he risk-return relationship. generally, the higher the potential return of an investment, the higher the risk. there is no guarantee that you will actually get a higher return by accepting more risk. diversification enables you to reduce the risk of your portfolio without sacrificing potential returns.

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