Final answer:
A drought in California leads to a leftward shift in the supply curve for tomatoes, causing higher prices and lower quantity sold. This represents a decrease in economic efficiency due to a loss of consumer and producer surplus resulting from the reduced availability of tomatoes.
Step-by-step explanation:
Using a demand and supply graph for the tomato market, a drought such as the one described in California decreases the supply of agricultural products. In graphical terms, this is represented by a leftward shift of the supply curve, indicating that at any given price, a lower quantity of tomatoes will be supplied. The new equilibrium price where the supply and demand curves intersect will be higher, and the equilibrium quantity will be lower compared to the initial situation.
This change in supply, attributed to natural conditions like drought, leads to an increase in tomato prices and a decrease in the quantity sold. Economic efficiency is affected because the quantity of tomatoes that the market is able to supply at the new, higher price is lower than the quantity consumers would be willing to buy at the original price, leading to a loss of what economists call "consumer and producer surplus."
When the supply curve shifts to the left, it decreases the economic welfare of both consumers, who pay higher prices, and producers who sell fewer units. This phenomenon is known as a decrease in economic efficiency because the market is not allocating resources in a way that maximizes the total benefit to society.