In the 1960s, water was inexpensive. However, by 1965 Canada saw one of the country’s worst droughts. At this time, the country produced approximately 70 per cent of the world’s supply of wheat. The summer of 1966 exploded into flames as over 1,400 fires swept the state. The country was forced to increase its imports of barley and oats (close substitutes of wheat) which were sold at a lower price than wheat. Ottawa was particularly hard hit by the drought. There was a limit on the water that could be consumed. Rising to the challenge, residents reduced their water consumption by 66%. As the drought continued, Ottawa saw more and more evidence of just how valuable water was. Besides being motivated to conserve, residents were also willing to spend more money so they would not be as vulnerable again. i. Illustrate and explain the how conditions in 1965-66 impacted (i) the water market and (ii) the wheat market. [6 marks] ii. Is demand for(i) wheat and (ii) water price elastic orinelastic? Justify your choices. [4 marks] iii. Discuss one factor EACH that you think influences the elasticity of demand and supply for wheat. Provide examples [4 marks] iv. How will revenue for producers of (i) water and (ii) wheat be impacted by the conditions in 1965-66. Explain

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In the 1960s, water was inexpensive. However, by 1965 Canada saw one of the country’s worst droughts. At this time, the country produced approximately 70 per cent of the world’s supply of wheat. The summer of 1966 exploded into flames as over 1,400 fires swept the state. The country was forced to increase its imports of barley and oats (close substitutes of wheat) which were sold at a lower price than wheat. Ottawa was particularly hard hit by the drought. There was a limit on the water that could be consumed. Rising to the challenge, residents reduced their water consumption by 66%. As the drought continued, Ottawa saw more and more evidence of just how valuable water was. Besides being motivated to conserve, residents were also willing to spend more money so they would not be as vulnerable again. i. Illustrate and explain the how conditions in 1965-66 impacted (i) the water market and (ii) the wheat market. [6 marks] ii. Is demand for(i) wheat and (ii) water price elastic orinelastic? Justify your choices. [4 marks] iii. Discuss one factor EACH that you think influences the elasticity of demand and supply for wheat. Provide examples [4 marks] iv. How will revenue for producers of (i) water and (ii) wheat be impacted by the conditions in 1965-66. Explain

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