Answer to Question #298264 in Microeconomics for garg

Question

“A world wide drought will increase the total revenue earned by the farmers staying in 

Haryana. However, a drought in Haryana will reduce their total revenue.” Explain.

Answer 1

Answer

The reason for increased revenue for farmers is because the reduced agricultural production due to drought causes food shortages and farmers who manage to provide like cereals among others earn a lot from it.

The country on the other experiences reduced income as a the country is forced to import products from other countries to cater for its people. Additionally, prices are bound to be pushed up due to insufficient local products thereby causing reduced revenue.