Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 5 - Part II - Elasticity and its Application - Questions for Review: 9

Answer

This event will hurt fava bean farmers more if the demand for fava beans is very elastic.

Work Step by Step

The storm will drive up the price of fava beans, so if the demand for fava beans is very elastic, customers will decrease their quantity demanded of fava beans by a much greater magnitude than the increase in price. As a result, consumers will most likely substitute to another similar food with a lower price. However, if the demand for fava beans is very inelastic, consumers will not decrease their quantity demanded much in response to the increase in price, so farmers would not be hurt nearly as much.
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