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(Solved): Consider a farmer that produces both white and brown rice. It is discovered that the demand for brow ...



Consider a farmer that produces both white and brown rice. It is discovered that the demand for brown rice is relatively more inelastic compared to the demand for white rice. Initially the price of both white and brown rice is the same and the farmer produces the same quantity of white and brown rice. Now there is an improvement in agricultural technologies that affect both white and brown rice equally. Employ the demand and supply model to compare and contrast the effects on the equilibrium price and quantity of both white and brown rice from the technological improvement. Explain the effects on the farmer’s revenue from both types of rice after the change in technology and support your answers with one suitable market diagram. In addition, discuss the situation where the improvement in technology may be detrimental to the producers.



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