Q2b (6 marks) Assuming the food supply chain was competitive during the drought and consistent with your conclusion in 2a , illustrate the effect of a fall in the price of beef meat on the total revenue of a beef farmer

Use the TR test to discuss the impact of the drought and the change in the TR of a beef farmers.

Refer to the total revenue test and discuss (Hubbard et al 2019, section 4.3)

TR test = Compare P and TR change to work out elasticity

Price (Q1) Elasticity (2a) TR?

Use can make up numbers to support your argument. (make up the numbers)

TR = P x Qd

TR = P1 x Qd1

Use a graph to illustrate the change in the TR for the beef farmers. See figure 4.2 but do not forget to include the impact of the competitiveness caused using the drought (refer to Q1a

2a cunclusion

When the prices change there will be a change in demand causing it to be inelastic. In this case determinants that are found are: price of the goods, consumer expectations, taste, and income. Based on Hubbard et al, 2019 pg 100, price elasticity is the demand signifies the sensitivity of quantity demanded due to change in the price of commodity. Elastic is in this case is if consumers are sensitive to price change, a fall in price will bring a increase in quantity demanded. Instead, when demand is inelastic consumers are not affected by price change which means if a big decrease in price will be slight increase in its quantity demand. The beef market is a large company for the Australian country, people who choose to have beef would prefer Australian beef to any other type of meat, that is why it has inelastic demand.

cunclusion of Q1a

A perfect competitive market based on Hubbard et al 2019, 7.1 a market must have many buyers and sellers, firms must be producing identical product and there must be no barriers to entry of new firms . In this case its grains and cattle and the quantity demand vs price. In perfect During the Drought, the supply of grains falls (decreases) as the grains require water for there production. So then the feed for cattle becomes expensive increasing in the supply demand of a cattle . As the farmers cannot afford to feed cattle they would have to sell or discard cattle if this is not fixed. This will lead to and increase the supply of beef. The supply curve shift to right (Purple) to SS1 while price of beef will decrease to P1 the quantity demand rises Q1. This is an increase in the supply which then cause a sell down on the cattle.