14. Application: Demand elasticity and agriculture Consider the market for corn. The following graph shows the...

 

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14. Application: Demand elasticity and agriculture Consider the market for corn. The following graph shows the weekly demand for corn and the weekly supply of corn. Suppose a blight occurs that destroys a significant portion of corn crops. Show the effect this shock has on the market for corn by shifting the demand curve, supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move to its original position, just drag it a little farther. PRICE (Dollars per bushel) 30 24 18 12 0 0 6 12 18 QUANTITY (Millions of bushels) S₂ S₁ Demand Total Revenue (Millions of Dollars) 24 30 O Demand Supply ? curve and I snaps back One of the growers 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 corn between the prices of $15 and $18 per bushel is 1.22, which means demand is elastic between these two points. Therefore, you would tell the grower that his claim is incorrect, because total revenue will decrease Y as a result of the blight. Confirm your previous conclusion by calculating total revenue in the corn market before and after the blight. Enter these values in the following table. Before Blight After Blight 14. Application: Demand elasticity and agriculture Consider the market for corn. The following graph shows the weekly demand for corn and the weekly supply of corn. Suppose a blight occurs that destroys a significant portion of corn crops. Show the effect this shock has on the market for corn by shifting the demand curve, supply curve, or both. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move to its original position, just drag it a little farther. PRICE (Dollars per bushel) 30 24 18 12 0 0 6 12 18 QUANTITY (Millions of bushels) S₂ S₁ Demand Total Revenue (Millions of Dollars) 24 30 O Demand Supply ? curve and I snaps back One of the growers 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 corn between the prices of $15 and $18 per bushel is 1.22, which means demand is elastic between these two points. Therefore, you would tell the grower that his claim is incorrect, because total revenue will decrease Y as a result of the blight. Confirm your previous conclusion by calculating total revenue in the corn market before and after the blight. Enter these values in the following table. Before Blight After Blight

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We are given P1 15 P2 18 Q1 15 millions of bushels as observed fr... View the full answer