Answer to Question #156329 in Macroeconomics for liz

Question

Internationally, the average rice farmer has increased the amount of acreage under cultivation over the past few years. The result has been that the average rice plantation produces significantly more rice than it did 15 to 20 years ago. Unfortunately for the growers, however, this has also been a period in which their total revenues have plunged. In terms of elasticity, what must be true for these events to have occurred? Explain these events with the aid of a diagram.

Answer 1

Answer :

Meaning of grower: The term 'grower' appears to be used in reference to people who grow horticultural food crops, grow flowers or edible food / crops.

Farmer: Therefore a farmer is someone who not only grows food from the land but also sells that produce to consumers.

Price elasticity of supply : The technical definition of elasticity is the proportionate change in one variable over the proportionate change in another variable.

Formula

% change in quantity / %in price

$\Delta q /q *100 /\Delta p/p*100$

$\%\; change\; in\; quantity\; /\%\; change\; in\; price$ $\%\; change\; in\; quantity\; /\%\; change\; in\; price$ $\%$ $= \Delta q/\Delta p* p/q$

There is positive relation between pand quantity.

P↑$\to$ Q↑ positive relation - -

According to the question - - -

Suppose in year 15 to 20 amount would be 80 acreage

Response quantity supplied would be 60 quartile

But after increasing the amount of acreage

106 response quantity supplied will be 100

$P*Q=total revenue$

$P*Q=TR$

$\Delta = change$

$\Delta q/\Delta p*P/q$

$\Delta p= 26$

$\Delta q= 40$

Putting in formula for farmers

$P*Q=TR$

If increase in price TR increase more then price elasticity will be >1

In this diagram quantity increases more that's why TR increases more so P_{es =} >1

Other hand for grower

$P*Q=TR$

P_{es = }less than 1

because quantity is not increased according to the amounts and TR also is not increased too much.

So farmers TR will be more, Grower TR will be less