The rice sector in Pakistan is extremely important in terms of export earnings, domestic employment, rural...

 

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The rice sector in Pakistan is extremely important in terms of export earnings, domestic employment, rural development and poverty reduction. Rice is an important food as well as cash crop in Pakistan. It accounts for 3.0 percent of the value added in agriculture and 0.6 percent of GDP. After wheat, it is the second main staple food crop in Pakistan. Due to the impact of the recent flooding, in the FY 2022-23, rice production forecast is lowered to 8.3 million tons which means that this year export can be less at 4.3 million tonnes as compared to 4.8 million tonnes in FY 2021-22. Members of Rice Exporters Association of Pakistan (REAP) are of the view that government should provide support to all flood hit farmers across the country in order to cope up the current situation. Hypothetical data on price, quantity demanded and quantity supplied of rice in domestic market is given in the following table: Price per Kg of rice (Rs.) 140 160 180 200 Quantity demanded of rice (tons) 98,000 92,000 90,000 88,000 Quantity supplied of rice (tons) 80,000 86,000 90,000 94,000 Requirements: A. What is the equilibrium price and equilibrium quantity of rice in domestic rice market. Also show the market equilibrium graphically. B. Calculate price elasticity of supply when price of rice is rupees 160. C. What does the value of elasticity of supply calculated in part B represent? D. Suppose government has given support to rice producers and as a result, numbers of suppliers of rice in domestic market are increased. Graphically analyze the impact of this situation on equilibrium price and equilibrium quantity of rice. The rice sector in Pakistan is extremely important in terms of export earnings, domestic employment, rural development and poverty reduction. Rice is an important food as well as cash crop in Pakistan. It accounts for 3.0 percent of the value added in agriculture and 0.6 percent of GDP. After wheat, it is the second main staple food crop in Pakistan. Due to the impact of the recent flooding, in the FY 2022-23, rice production forecast is lowered to 8.3 million tons which means that this year export can be less at 4.3 million tonnes as compared to 4.8 million tonnes in FY 2021-22. Members of Rice Exporters Association of Pakistan (REAP) are of the view that government should provide support to all flood hit farmers across the country in order to cope up the current situation. Hypothetical data on price, quantity demanded and quantity supplied of rice in domestic market is given in the following table: Price per Kg of rice (Rs.) 140 160 180 200 Quantity demanded of rice (tons) 98,000 92,000 90,000 88,000 Quantity supplied of rice (tons) 80,000 86,000 90,000 94,000 Requirements: A. What is the equilibrium price and equilibrium quantity of rice in domestic rice market. Also show the market equilibrium graphically. B. Calculate price elasticity of supply when price of rice is rupees 160. C. What does the value of elasticity of supply calculated in part B represent? D. Suppose government has given support to rice producers and as a result, numbers of suppliers of rice in domestic market are increased. Graphically analyze the impact of this situation on equilibrium price and equilibrium quantity of rice.

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