Question
The following graph illustrates the market for cashews. It plots the monthly supply of cashews and the monthly demand for cashews. Suppose a stretch of
The following graph illustrates the market for cashews. It plots the monthly supply of cashews and the monthly demand for cashews. Suppose a stretch of unseasonably good weather occurs, allowing cashew growers to produce more cashews per hectare.Show the effect this shock has on the market for cashews by shifting the demand curve, supply curve, or both.A number of the growers are concerned about the price decrease initiated by the stretch of favorable weather conditions, as they believe it will lead to decreased 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 $10 and $8 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 favorable weather conditions.Confirm your previous conclusion by calculating total revenue in the cashew market before and after the favorable weather conditions. Enter these values in the following table.Total Revenue (Millions of Dollars) Before Favorable Weather Conditions. Blank (insert number box here)After Favorable Weather Conditions. Blank (Insert number box here)
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