Reference no: EM133130122

"Mainland vegetables have seen prices surge by 30 percent due to adverse weather over the past few months, a wholesale association said. Hong Kong Imported Vegetable Wholesale Merchants Association chairman Yuen Cheong said 90 percent of vegetables sold in Hong Kong are from the mainland. Delayed logistics amid the Covid-19 pandemic and persistent thunderstorms in the mainland have affected transportation and the harvest of vegetables, he said. (Source: The Standard 28 Oct. 2021)".

(i) With the help of a demand-supply diagram, briefly explain how a surge in the price of mainland vegetables may affect the price of domestic vegetables in Hong Kong.

(ii) Suppose that the HKSAR government would like to reduce the price of vegetables by lowering the costs of vegetable sellers. To achieve this policy goal, the HKSAR government provides a lump-sum cash subsidy to vegetable sellers. Briefly explain how this policy may affect the price of vegetables in Hong Kong.

State the number of words used at the end of your answer.