Farmers have a relatively inelastic demand for their crops. Suppose there is a bumper crop year (an unusually large harvest). Will farmers be happy or sad about the news there has been an unusually large amount of their crop produced this year? Why?"
2007-04-11 07:01:14 · 8 answers · asked by La Flaca 4 in Social Science ➔ Economics
All of these answers are wrong (justin is close, but demand doesnt go down, ever)....
First off, lets cover elastic vs inelastic.
Elastic demand means that consumers are very sensitive to price. In other words, they will stop buying something if the price goes up even a little bit. (in the extreme)
Inelastic demand means that consumers are very insensitive to price. In other words, they will buy the same amount no matter how the price changes (think food, and farmers!).
So, for farmers, if they have inelastic demand, that means people want the same amount of their crop (say corn), every year, no matter what. If the farmers somehow end up with twice as much corn, they are screwed. There is no way for them to get people to buy more because people only want the 5 ears of corn they get every year.
Now if demand is not perfectly inelastic, there will be a drop in price due to the supply increase that will allow for a slight rise in demand. (The demand curve will be almost vertical, but not truly vertical). The slight rise in demand will help the farmers a little bit, even though the price is falling, but overall, for an inelastic product, a huge rise in supply without a seperately triggered corresponding raise in demand is bad for the supplier.
2007-04-11 08:00:49 · answer #1 · answered by Anonymous · 0⤊ 0⤋
It means they will at best be indifferent and likely sad. A nearly inelastic demand curve is close to vertical. There will be a small increase in demand, but very small and there will be a drop in price. The increase in demand will partially offset the price drop and the size of the drop also depends not only on the shift but also on the slope of the supply curve. The crop is already out of the ground and so sellers will compete, with delivery costs being the only real variable cost remaining, to be first to sell their crop. The size of the drop will be dependent on the structure of the industries variable costs. If there are heterogeneous costs based upon locality, then the high cost firms will plow under their corn and a market failure will occur. If prices for all firms are equal, then all firms will deliver some and it is likely the stores that will allow the crops to rot. The degree of sadness will be dictated by the variable costs.
2007-04-11 10:29:05 · answer #2 · answered by OPM 7 · 0⤊ 0⤋
What the term means is that for every change in price, the change in demand is smaller in proportion. Analysing the situation, I believe that a good harvest means supply increases, thus prices decrease. Technically, this should entail greater demand. However, the inelasticity of agricultural goods causes demand to only increase by a little, profits decline and the income of farmers suffers as well. Incomes in other sectors should increase given that agricultural goods are now cheaper.
2016-04-01 09:15:42 · answer #3 · answered by Anonymous · 0⤊ 0⤋
They will be happy. Inelastic demand means that the demand varies little with the price. Usually with a high supply (bumper crop) the price would go down.
2007-04-11 08:11:37 · answer #4 · answered by Anonymous · 0⤊ 0⤋
they will be sad because the supply increased, which will lower the price and increase the quantity demanded. Because it is inelastic, it wont be by much, but there will be some profit loss
The person below is correct if demand is perfectly inelastic, but it is "relatively" inelastic. Also, the QUANTITY demaned will increase because the slope of the demand line is not vertical. I am not referring to the demand line moving around, it is the supply curve moving
The loss will be much much less than if the slope was MORE horizontal.
Splitting hairs here, but there is a difference
2007-04-11 07:28:21 · answer #5 · answered by ? 2 · 0⤊ 0⤋
The demand for which a percentage change in a product's price causes a smaller percentage change in quantity demanded.
2014-12-18 03:37:16 · answer #6 · answered by Saiful 2 · 0⤊ 0⤋
Happy.
Inelastic demand means that consumers tend to continue to buy the product regardless of supply or price.
Oh, and yes, I agree. Nice rack.
2007-04-11 07:10:48 · answer #7 · answered by lunatic 7 · 0⤊ 0⤋
I agree with Josie and lunatic.
2007-04-11 07:11:06 · answer #8 · answered by scarab 2 · 0⤊ 0⤋