14. Application: Demand elasticity and agriculture The following graph illustrates the market for cashews. It plots the monthly supply of cashews and the monthly demand for cashews. Suppose an increase in pests destroys a major portion of cashew trees. Show the effect this shock has on the market for cashews 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 a curve and it snaps back to its original position, just drag it a little farther. PRICE (Dollars per ton) 30 24 18 12 6 0 0 8 12 Supply Demand QUANTITY (Thousands of tons) 16 Total Revenue (Thousands of Dollars) 20 Demand. Supply (?) One of the growers is pleased with the price increase caused by the pests because he believes it will lead to increased revenue. Using elasticities, you will be able to determine whether this price change will lead to a rise or fall in total revenue in this market. Using the midpoint method, the price elasticity of demand for cashews between the price levels of $15 and $18 per ton is, meaning that between these two points, demand is . Thus, you can conclude that the grower's claim is because total revenue will due to the pestilence. Confirm your previous conclusion by calculating total revenue in the cashew market before and after the pestilence. Enter these values in the following table. F Before Pestilence After Pestilence
14. Application: Demand elasticity and agriculture The following graph illustrates the market for cashews. It plots the monthly supply of cashews and the monthly demand for cashews. Suppose an increase in pests destroys a major portion of cashew trees. Show the effect this shock has on the market for cashews 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 a curve and it snaps back to its original position, just drag it a little farther. PRICE (Dollars per ton) 30 24 18 12 6 0 0 8 12 Supply Demand QUANTITY (Thousands of tons) 16 Total Revenue (Thousands of Dollars) 20 Demand. Supply (?) One of the growers is pleased with the price increase caused by the pests because he believes it will lead to increased revenue. Using elasticities, you will be able to determine whether this price change will lead to a rise or fall in total revenue in this market. Using the midpoint method, the price elasticity of demand for cashews between the price levels of $15 and $18 per ton is, meaning that between these two points, demand is . Thus, you can conclude that the grower's claim is because total revenue will due to the pestilence. Confirm your previous conclusion by calculating total revenue in the cashew market before and after the pestilence. Enter these values in the following table. F Before Pestilence After Pestilence
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:14. Application: Demand elasticity and agriculture
The following graph illustrates the market for cashews. It plots the monthly supply of cashews and the monthly demand for cashews. Suppose an
increase in pests destroys a major portion of cashew trees.
Show the effect this shock has on the market for cashews 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 a curve and it snaps back
to its original position, just drag it a little farther.
PRICE (Dollars per ton)
30
24
18
12
6
0
0
4
8
12
Supply
Demand
QUANTITY (Thousands of tons)
16
Total Revenue (Thousands of Dollars)
20
Demand
Supply
?
One of the growers is pleased with the price increase caused by the pests because he believes it will lead to increased revenue. Using elasticities, you
will be able to determine whether this price change will lead to a rise or fall in total revenue in this market.
Using the midpoint method, the price elasticity of demand for cashews between the price levels of $15 and $18 per ton is, meaning that
between these two points, demand is
. Thus, you can conclude that the grower's claim is
because total revenue will
due to the pestilence.
Confirm your previous conclusion by calculating total revenue in the cashew market before and after the pestilence. Enter these values in the following
table.
Before Pestilence After Pestilence
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