ECO201: A Good Harvest from Conducive Weather may not Always Benefit the Farmers in Terms of Revenue Earned: Managerial Economics Assignment, SUSS, Singapore

Questions

(a) “A good harvest from conducive weather may not always benefit the farmers in terms of revenue earned”. Discuss using a suitable farm product diagram the validity of this statement, taking into consideration the price elasticity of demand for farm products.

(b)  “While a tax tends to create the deadweight loss, a subsidy always results in a higher economic surplus. Hence the government should avoid imposing taxes and should always provide a subsidy in the market”. Do you agree? Illustrate with suitable market diagrams.

(c) For two products A and B, it will be irrational for a consumer not to buy more of product A and less of product B if the marginal utility of A exceeds the marginal utility of B at their last units of consumption. True, false or uncertain? Explain.