if the market demand for agricultural commodities in price inelastic, would a bad harvest lead to an increase or decrease in the income of farmer as a group. why
Dear student,
Agricultural commodities are necessities. If the demand for agricultural commodities is price inelastic, i.e. with change in price of commodity, demand does not change much, a bad harvest would lead to increase in the income of farmers, because during bad harvest most of the crops get ruined up, which in turn leads to shortage of commodities, i.e. supply of commodities decreases, and as agricultural commodity is price inelastic, the farmers can increase the price of their commodity which will lead to increase in the income of farmer.
Regards
Agricultural commodities are necessities. If the demand for agricultural commodities is price inelastic, i.e. with change in price of commodity, demand does not change much, a bad harvest would lead to increase in the income of farmers, because during bad harvest most of the crops get ruined up, which in turn leads to shortage of commodities, i.e. supply of commodities decreases, and as agricultural commodity is price inelastic, the farmers can increase the price of their commodity which will lead to increase in the income of farmer.
Regards