tak ONAPCOA801010000003ec457900500008 ct thughes-00068ckom 1521658759832 0AAA055

Question

tak ONAPCOA801010000003ec457900500008 ct thughes-00068ckom 1521658759832 0AAA05590154 According to world Bank data, tobacco constitutes 50% of Malawi's total exports. The following graph shows the market for tobacco in Malawi. Suppose that an adoption of healthier lifestyles in advanced countries leads to a fall in the price of tobacco from $6 per pound to $3 per pound. On the graph, use the purple points (diamond symbols) to plot a line showing the change in the market for tobaccu Malawi. (Hint: It is a parallel shift of either the supply or demand curve.) PRICE IDollarsl 12 New Schedule Supply 10 Revenue Before Revenue After Demand 12 TOBACCO [MLions of pounds! Ltete On the gragh, use the tan points (rectangle symbols) to show Malawi's revenue before the price change. Then use the grey poi nts (star symbols) to show Malawi's revenue after the price change

Explanation / Answer

Due to fall in price demand will also fall and the new equilibrium level will be price at $3 and quantity at 4 million pounds.

Before price decrease revenue=$6*5million= $30million

After price decrease, revenue= $3*4million= $12million. This suggest that supply of tobaco will decline.

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