(E) Ceteris paribus, assume recently there was a severe drought that hit the south-eastern part of the United States (US) where most peanuts are grown.In response to the drought, assume the US government decided to allow more foreign peanuts (increase in imports) to come into the US from countries like China and Argentina.

1. Use graphical demand and supply analysis to support your explanation of the impact from the drought and increase in imports from overseas, on equilibrium price and quantity of the market for peanuts in the US.Assume the drought has a larger effect on the peanut market than the increase in imports.(Hint: Show the impact of the drought first, then followed by the impact of higher imports on the same diagram).

2. Following the likely market response from the drought and an increase in imports (answer from part a), discuss how consumers would likely react to the consumption of peanuts now?

3.Given your answer in part (a) and assuming the price elasticity of demand for peanuts is 0.5, what impact will this have on the local peanut grower's total revenue?