Please discuss this statement: “a drought around the world raises the total revenue that farmers receive from the sale of grain, but a drought only in Queensland reduces the total revenue that Queensland farmers receive”. Explain the characteristics of demand and supply that determine changes in total revenue, considering different time periods.

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Asked Nov 6, 2019
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Please discuss this statement: “a drought around the world raises the total revenue that farmers receive from the sale of grain, but a drought only in Queensland reduces the total revenue that Queensland farmers receive”. Explain the characteristics of demand and supply that determine changes in total revenue, considering different time periods.

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Expert Answer

Step 1

In the first situation, where a drought has occurred around the world will lead to a decrease in the world supply of the grain and hence world supply curve of the grain shifts to its left. This decrease in the world suppl...

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