Log in
Economics
1
answer
0
watching
824
views

Consider the market for apples. The following graph shows the weekly demand for apples and the weekly supply of apples. Suppose a blight occurs that destroys a significant portion of apple crops.

Show the effect this shock has on the market for apples by shifting the demand curve, supply curve, or both.

One of the farmers is excited by the price increase caused by the blight because he believes it will increase revenue in this market. As an economics student, you can use elasticities to determine whether this change in price will lead to an increase or decrease in total revenue in this market.

Using the midpoint method, the price elasticity of demand for apples between the prices of $15 and $21 per bushel is (0.67,0.75,1.5,3) , which means demand is (elastic,inelastic,unit elastic) between these two points. Therefore, you would tell the farmer that his claim is (correct, incorrect) because total revenue will (decreases,increase) as a result of the blight.

Confirm your previous conclusion by calculating total revenue in the apple market before and after the blight. 

 

Watch
1
answer
0
watching
824
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Sonal Bahl
Sonal BahlLv10
2 Jan 2021

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Assume that apples are produced in a perfectly competitive market. Columbia’s Orchard is a typical firm that grows and sells apples. Currently, Columbia earns zero economic profit, and the market price of apples is $10 per bushel.

a) Draw a correctly labeled graph showing Columbia’s demand curve, average total cost curve, and marginal cost curve, and show the profit-maximizing quantity, labeled Qc.

b) Suppose an increase in the popularity of apple, the demand for apple increases.

How will the increase in the demand for apples affect Columbia’s economic profit in the short run? Explain.

c) What will happen to Columbia’s economic profit in the long run? Explain.

1. Explain briefly why generally government shouldn't place taxes in markets that have pre-existing distortions. Be specific. Give an example where taxes can improve the distortion

2. Suppose the demand for apples is perfectly elastic and the government levies a tax t on the producers of apples. Assume that the supply of apples is neither perfectly elastic nor perfectly inelastic (upward sloping)

a. Explain using a graph how the price paid by consumers will change.

b. What is the statutory burden of the tax ? Which party bears the largest economic burden?

c. Is this change larger or smaller than the price change that would result if demand for apples were not perfectly elastic?

d. How would the quantities of apples consumed change because of the tax? Is this change in quantity larger or smaller than the change that would result if the demand for apples were not perfectly elastic?

14. Application: demand elasticity and agriculture

Consider the market for soybeans. The following graph shows the weekly demand for soybeans and the weekly supply of soybeans. Suppose a spell of unusually good weather occurs, which enables soybean producers to generate more soybeans per acre of land.

Show the effect this shock has on the market for soybeans by shifting the demand curve, supply curve, or both.

One of the growers is concerned about the price decrease caused by the spell of good weather because he feels it will lower the revenue in this market. As an economics student, you can use elasticities to determine whether this change in price will lead to an increase or decrease in total revenue in this market.

Using the midpoint method, the price elasticity of demand for soybeans between the prices of $10 and $6 per bushel is.........., which means that the demand is............between these two points. Therefore you would tell the grower that his claim is...........because total revenue will............as a result of the spell of good weather.

Confirm your conclusion by calculating total revenue in the soybean market before and after the spell of good weather. Enter these values in the following table.

                                                   Before the spell of good weather            After the spell of good weather

Total Revenue(millions of dollars) 

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in