Answer to Question #220258 in Microeconomics for sehari

Question

a. Farmers whose crops were destroyed by the floods
were much worse off, but farmers whose crops
were not destroyed benefited from the floods.
Why?
b. What information would you need about the
market for wheat in order to assess whether
farmers as a group were hurt or helped by the
floods?

Answer 1

a) This is because the destruction of the crops resulted into market shortages. This reduced supply in the market as the demand was still maintained, leading to the increase in price for the crops that were in the market as the farmers who their crops were never destroyed made unusual profits.

b) I would need information regarding the supply as production affected the supply within the market