Supply Shock Reduces Domestic Output

Steps:

• Floods destroy agricultural products, decreasing domestic supply.
• Decreased supply shifts the supply curve leftward, raising equilibrium price.
• Higher prices increase domestic demand for cheaper foreign alternatives.
• To meet unmet demand, imports of agricultural products rise.

Why D is correct:

• Law of supply and demand: reduced supply causes price to rise, prompting higher imports to restore equilibrium quantity.

Why the others are wrong:

• A: Price falls contradicts supply reduction, which raises price.
• B: Both falling ignores price increase from scarcity and import need.
• C: Imports falling overlooks how high prices boost import demand.

Final answer: D