Diagram: A standard supply and demand diagram should be drawn. The initial supply curve should be labelled 'S1'. A new supply curve, 'S2', should be drawn to the right of S1. The diagram should clearly show the label 'Cost of Raw Materials' on the horizontal axis and 'Price' and 'Quantity' on the vertical axis.

Explanation:

• Decrease in Cost of Raw Materials: A decrease in the cost of raw materials makes it cheaper for producers to produce the good. This increases the profitability of production.
• Increase in Supply: As a result of lower production costs, producers are willing and able to supply more of the good at each price level. This leads to a shift in the supply curve to the right.
• Equilibrium Changes: The rightward shift in the supply curve leads to a new equilibrium point where the equilibrium price is lower and the equilibrium quantity is higher. This is because the increased supply puts downward pressure on the price, while the higher quantity reflects the increased willingness of producers to supply.

Answer:

A decrease in the supply of an agricultural product can be caused by several factors. Here are three possible explanations, with examples:

• Weather Conditions: Adverse weather conditions, such as a prolonged drought, excessive rainfall, or a severe frost, can significantly damage crops and reduce yields. For example, a drought in California could severely impact the supply of almonds and other crops, leading to a decrease in supply.
• Government Policies: Government policies can influence agricultural supply. For instance, changes in subsidies, import tariffs, or environmental regulations can affect farmers' decisions to produce. If a government reduces subsidies for a particular crop, farmers may reduce production, leading to a decrease in supply. Similarly, stricter environmental regulations might increase production costs, discouraging some farmers.
• Disease or Pests: Outbreaks of plant diseases or pest infestations can devastate crops and reduce the amount available for sale. For example, a widespread disease affecting wheat crops could lead to a significant decrease in the supply of wheat. This would reduce the quantity supplied at any given price.

These factors can operate independently or in combination to influence the overall supply of a product.

Supply refers to the quantity of a good or service that producers are willing and able to offer for sale at a given price during a specific period of time. It's crucial to understand because supply, along with demand, determines the market equilibrium price and quantity.

Understanding supply allows us to analyse how changes in factors other than price (e.g., input costs, technology, expectations) can shift the supply curve. A shift in the supply curve will lead to a new equilibrium price and quantity. For example, if input costs increase, the supply curve will shift to the left, resulting in a higher equilibrium price and lower equilibrium quantity. Conversely, advancements in technology can shift the supply curve to the right, leading to a lower equilibrium price and higher equilibrium quantity. Therefore, a clear understanding of supply is fundamental to predicting market outcomes and analysing the effects of economic changes.