The diagram above illustrates the demand for and supply of maize. Use the information in the diagram to answer the questions that follow
(a) (i) What is the total revenue of the farmer at the initial equilibrium?
(ii) Calculate the total revenue of the farmer if the supply curve shifts to S\(_1\)S\(_1\)
(b) What change occurs in the total revenue of the farmer when the price falls from 100 Dollars to 40 Dollars per tonne?
(b) (i)Use the figures in the diagram to determine the price elasticity of demand for maize (u) Interprete your answer.
(c) Give two reasons for the shift of the supply curve from SS to S\(_1\)S\(_1\)
Explanation
(a) (i) Total revenue is
Price x Quantity = 100 Dollars x 30 tonnes
Total revenue is = 3000 Dollars
Total revenue = P x Q = 40 Dollars x 40 tonnes
Total revenue is = 1 ,600 Dollars
(b) 3000 Dollars - 1600 Dollars = 1400 Dollars
There is a Fall in TR
(c)(i) \(\frac{Percentage change in Quantity demanded}{Percentage change in Price}\)
\(\frac{10}{30}\) x \(\frac{100}{1}\) = \(\frac{60}{100}\) x \(\frac{33.33}{60}\) = 0.55
OR \(\frac{\Delta Q}{\Delta P}\) x \(\frac{P}{Q}\) ; \(\frac{\10}{\60}\) x \(\frac{100}{30}\) = 0.55
(ii) Ed is less than 1 therefore the demand for maize is inelastic
(d) (i) A fall in the price of other related goods will lead to increase in production.
(ii) Improvement in technology will lead to increase in production.
(iii) Fall in input prices or fall in cost of production.
(iv) Favorable climate
(v) Increase in the number of producers.