Consider the market for apples. The following graph shows the weekly demand for
ID: 1162586 • Letter: C
Question
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 Demand Suppy QJANTITY (illions of bushels One of the growers is excited by this advancement because now he can sell more crops, which he believes will increase revenue in this market. As an economics student, you can use elasticities to determine whether this change in price will lead to an increase or decrease in total revenue in this market. Using the midpoint method, the price elasticity of demand for apples between the prices of $5 and $4 per bushel is-, which means demand is you would tell the grower that his claim isbecause total revenue will result of the technological advancement. between these two points. Therefore, as a Confirm your previous condlusion by calculating total revenue in the apple market before and after the technological advancement. Enter these values in the following table. Before Technological Advancement After Technological Advancement Total Revenue (Millions of Dollars)Explanation / Answer
P
Q
Ed
TR
4
24
96
5
21
-3
105
The price elasticity of demand for apples between the prices of $5 and $4 per bushel is -3, which means demand is elastic between these two points. Therefore, you would tell the grower that his claim is correct, because total revenue will increase as a result of the technological advancement.
Total revenue before technological advancement is 96
Total revenue after technological advancement is 105
P
Q
Ed
TR
4
24
96
5
21
-3
105