14. Application: Demand elasticity and agricultureConsider the market for apples. The following graph shows the weekly demand for apples and the weekly supply of apples. Suppose new farming technology is developed that enables growers to produce more crops with the same resources.Show the effect this shock has on the market for apples by shifting the demand curve, supply curve, or both.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. Show the effect this shock has on the market for apples by shifting the demand curve, supply curve, or both.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.10SupplyDemandSupplyDemand16243240QUANTITY (Millions of bushels)One of the growers is excited by this advancement because now she can sell more crops, which she believes will increase revenue in this market. Asan economics student, you can use elasticities to determine whether this change in price will lead to an increase or decrease in total revenue in thismarket.Using the midpoint method, the price elasticity of demand for apples between the prices of $5 and $4 per bushel iswhich means demand isbetween these two points. Therefore, you would tell the grower that her claim isbecause total revenue willas a result of the technological advancement.Confirm your previous conclusion by calculating total revenue in the apple market before and after the technological advancement. Enter these valuesin the following table.Before Technological AdvancementAfter Technological AdvancementTotal Revenue (Millions of Dollars)PRICE (Dollars per bushel)

Answered: Note: Select and drag one or both of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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14. Application: Demand elasticity and agriculture

Consider the market for apples. The following graph shows the weekly demand for apples and the weekly supply of apples. Suppose new farming technology is developed that enables growers to produce more crops with the same resources.

Show the effect this shock has on the market for apples by shifting the demand curve, supply curve, or both.

Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

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14) The technological shock would imply that the farmers are able to produce more of the goods with the same resources. This implies that they would be want to supply more as the cost per unit has now reduced.

This is a supply-side shock and hence the supply curve would be affected. The supply curve shifts to right.

The graph below shows the shift in the supply curve.

The dotted orange line denotes the new supply curve where the equilibrium price is $4 and quantity is 24.

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