Paper Example on Principles of Economics

Introduction

The destruction of half of the farm crops due to drought is beneficial for the farmers. This is because the demand for the crops become inelastic. From the supply curve, the shift to the left results to a resultant increase in price since the elasticity value is less than one, therefore, the total revenue also goes up. The additional income from the cost increment will be more prominent than the losses recorded in the revenue from the sales reductions. The ultimate essence is that farmers in totality earn more revenue in form of revenue from these reductions in the sales. Revenue quite often than not is not the same or equal to profit, however, they are meticulously interrelated.

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On the other hand, the destruction of the crops by the farmers in the absence of drought is not beneficial. This is because the market price will remain the same. In this regard, no farmer would have the motivation to indulge in their crops destructions because they would still face the same market price as they are. The strategy is helpful if all farmers mutually agree to destroy their crops. Some of which can be instigated by a government's program which is aimed at making them better off.

If half of the crops are destroyed, the supply curve shifts to the left resulting in an increase in the equilibrium price. Therefore, the extra income will be realized from the price increase in comparison to the loss of revenue due to the reduction in sales so long as the demand curve is inelastic.

However, the amount of revenue earned by a farmer reduces by half if he is the only one that destroys his crop since the destruction does not impact directly on the price. As such, the shift of the supply curve to the left is quite insignificant. Revenue could only be realized if the destruction is in large scale as the price for the crops increase. Alternatively, the shift could be significant if all the farmers in unison agree to destroy half of their crops. Notably, the demand maintains its status which means it is inelastic. At this point, the demand gets higher than the supply of the crops. Therefore, it prominently results in the increase in the prices for consumers. This case scenario causes a tremendous decrease in the supply of the particular crops. Case in point, OPEC decided to withhold the supply of oil in a bid to adjust the prices of the same in the years 1974. It was beneficial because it was done in a collective manner. Farmers profits thus increase if prices are low and it is in high quantity is lesser than the low quantity of high prices. If it is not in this light, the farmers that destroy their own crops would probably acknowledge their revenue decreases due to fact that price shift would be inconsequential. Consequently, this becomes an advantage to the farmers who did not destroy their crops as they get more revenue even to some extent more than the rest of the farmers.

Conclusion

Tentatively, it is only effective if the drought destroys the crops and not that the farmers destroy their own crops. Efficiency is when it maximizes the surplus in totality by all the members of a given group of farmers for this case. It is attained when the maximum achievable output is achieved from a particular input.