ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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In the 1960s, water was inexpensive. However, by 1965 Canada saw one of the country’s
worst droughts. At this time, the country produced approximately 70 per cent of the
world’s supply of wheat. The summer of 1966 exploded into flames as over 1,400 fires
swept the state. The country was forced to increase its imports of barley and oats (close
substitutes of wheat) which were sold at a lower price than wheat.
Ottawa was particularly hard hit by the drought. There was a limit on the water that
could be consumed. Rising to the challenge, residents reduced their water consumption
by 66%. As the drought continued, Ottawa saw more and more evidence of just how
valuable water was. Besides being motivated to conserve, residents were also willing to
spend more money so they would not be as vulnerable again.
i. Illustrate and explain the how conditions in 1965-66 impacted (i) the water market
and (ii) the wheat market. [6 marks]
ii. Is demand for(i) wheat and (ii) water price elastic orinelastic? Justify your choices.
[4 marks]
iii. Discuss one factor EACH that you think influences the elasticity of demand and
supply for wheat. Provide examples [4 marks]
iv. How will revenue for producers of (i) water and (ii) wheat be impacted by the
conditions in 1965-66. Explain
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