The demand for tobacco is price inelastic. Suppose there is a drought that destroys a large portion of the tobacco crop
What will happen in the market for tobacco? Will the equilibrium price and quantity change? If so, how? What will happen to the total revenue earned by tobacco farmers?
The drought will lower the supply of tobacco. The supply of tobacco will shift to the left, increasing price but lowering the equilibrium quantity sold. However, since the demand for tobacco is price inelastic, the percentage increase in price will be larger than the percentage decrease in quantity demanded. Therefore, the total revenue earned by tobacco farmers will rise.
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If the expected real interest rate in an economy is 6% and the expected inflation rate is 4%, then the nominal interest rate in the economy is:
A) 6%. B) 14%. C) 4%. D) 10%.
Risk that is related to the uncertainty about interest rate movements is called
A) default risk. B) interest-rate risk. C) the problem of moral hazard. D) security risk.
Suppose the production function is Y = AK0.3N0.7. Suppose in 2000, K = 1000, N = 100, and Y = 199.5. In 2010, capital, labor, and output have doubled, so K = 2000, N = 200, and Y = 399
(a) By what percentage did productivity grow from 2000 to 2010? (b) If output had risen to 798 instead of 399, and capital and labor doubled, by what percentage would productivity have grown from 2000 to 2010?
A Lorenz curve that is perfectly straight indicates
A. complete income equality. B. that a large portion of the population accounts for most of the income. C. that a small portion of the population accounts for most of the income. D. that society is very rich.