« previous next »

Author Question: The demand for tobacco is price inelastic. Suppose there is a drought that destroys a large portion ... (Read 193 times)

michelleunicorn

  • Hero Member
  • *****
  • Posts: 565
on: Jun 29, 2018
The demand for tobacco is price inelastic. Suppose there is a drought that destroys a large portion of the tobacco crop.
 
  What will happen in the market for tobacco? Will the equilibrium price and quantity change? If so, how? What will happen to the total revenue earned by tobacco farmers?

Question 2

A progressive tax is a tax that taxes income so that the average tax rate increases with income.
 
  Indicate whether the statement is true or false


kaylee05

  • Sr. Member
  • ****
  • Posts: 318
Reply #1 on: Jun 29, 2018
Answer to Question 1

The drought will lower the supply of tobacco. The supply of tobacco will shift to the left, increasing price but lowering the equilibrium quantity sold. However, since the demand for tobacco is price inelastic, the percentage increase in price will be larger than the percentage decrease in quantity demanded. Therefore, the total revenue earned by tobacco farmers will rise.

Answer to Question 2

TRUE


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Patients who have undergone chemotherapy for the treatment of cancer often complain of a lack of mental focus; memory loss; and a general diminution in abilities such as multitasking, attention span, and general mental agility.

Did you know?

Symptoms of kidney problems include a loss of appetite, back pain (which may be sudden and intense), chills, abdominal pain, fluid retention, nausea, the urge to urinate, vomiting, and fever.

Did you know?

The toxic levels for lithium carbonate are close to the therapeutic levels. Signs of toxicity include fine hand tremor, polyuria, mild thirst, nausea, general discomfort, diarrhea, vomiting, drowsiness, muscular weakness, lack of coordination, ataxia, giddiness, tinnitus, and blurred vision.

Did you know?

No drugs are available to relieve parathyroid disease. Parathyroid disease is caused by a parathyroid tumor, and it needs to be removed by surgery.

Did you know?

Autoimmune diseases occur when the immune system destroys its own healthy tissues. When this occurs, white blood cells cannot distinguish between pathogens and normal cells.

Color enhanced X ray of large malignant tumor in the right lung. Color enhanced X ray of large malignant tumor in the right lung.
Anatomy Of Large Intestine Anatomy Of Large Intestine
Large water tank, possibly a public or ritual bathing area, from Mohenjo-daro, Indus Valley ... Large water tank, possibly a public or ritual bathing area, from Mohenjo-daro, Indus Valley ...
Sonal bought a coat for $198.88, which included 8% PST and 5% GST. What was the selling price ... Sonal bought a coat for $198.88, which included 8% PST and 5% GST. What was the selling price ...
Refer to Scenario 3.1. If the price of potato chips is $0.50 and the price of Cola is $4.00, ... Refer to Scenario 3.1. If the price of potato chips is $0.50 and the price of Cola is $4.00, ...
Video: Acid-base imbalances - compensation of respiratory acidosis and alkalosis

For a complete list of videos, visit our video library