(A) “Market demand for wheat is relatively stable over time but market supply of wheat is very much influenced by the weather. For example, a natural drought decreases the supply of wheat and pushes up its prices while a bumper crop can severely depress wheat prices. Acts of nature thereby can result in large increases or decreases in the prices of agricultural commodities. The profitability of farmers becomes uncertain, as does the prices of food products and income needed to feed a household.”
Keeping in view the scenario (A), suggest the most appropriate action that the government should take in this situation in order to stabilize the wheat farmer’s income and to encourage them to continue farming whether there are bumper crops or droughts.
(B) “There is an awful lot of coffee in Brazil; it supplies a large share of the world market. In 1994, people first began to realize that a frost in Brazil would cause havoc with the 1995 harvest. The economist magazine at that time reported estimates that the 1995 crop would be less than that of 1994. It was obvious that coffee was going to be scarce in 1995. Anticipating this situation, speculators bought coffee in 1994, bidding up its price even before the supply fell. Following table shows the price rise of coffee during these years.
Years
1993
1994
1995
Price ($)
0.9
2.0
2.1
Export Quantity
113
102
85
Keeping in view the scenario (B), analyze whether the demand for coffee is elastic, inelastic or unitary elastic and why?
(Note: Post only the answer of (A) and (B) in the answer box; DON’T post the whole question statement.)
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Answers & Comments
Verified answer
I think the grain prices ups and downs are conformed with the basic economic principles of supply and demand and its (referred to corns only) elastic behavior is on corn based ethanol for bio-fuel. I can't quote with statistic as what you wanted. However, you can figure it out yourself by reading this well analyzed article with pinpointing how and why grain prices were ups and down in 2006-2009.
http://www.wikinvest.com/commodity/Grains
In accordance to your shown statistics of coffee prices rose to double from 1993 to 1994 and then followed the fractional increase in 1995, i think you should keep digging more about how and why coffee price rise a double spike and then followed the moderate rise in the following years. Simply speaking, supply, demand, and speculation. The stock market and those hedge fund investment may speculate the coffee price to a double fold. As what the first article described the coffee price is elastic, inelastic or unitary, it is affected by those middle persons want to raise to a certain prices periodically or a sharp raise or even fall to the bottom if the high yield results more supply than the consumer demand or the weather.
http://search.yahoo.com/search?p=Why%20and%20how%2...
Believe or not, Hong Kong is the most polluted city but also the most expensive to live in this world. The greed of top Hong Kong officials and oversized and overpaid civil servants have pulled up the real estate prices three to five times as it really valued and made million of middle class working peoples screaming foul for outrageous real estate prices, probably become the highest in this world.