Can You Explain The Paradox Of The Bumper Harvest According The Economics?


1 Answers

Tariq Habib Profile
Tariq Habib answered
We can use elastic ties to illustrate one of the most famous paradoxes of all economics: the paradox of the bumper harvest. Imagine that in a particular year nature smiles on farming. A cold winter kills off the pests, spring comes early for planting, and there are no killing frosts, rains nurture the growing shoots, and a sunny October allows a record crop to come to market. At the end of the year, family Jones happily settles down to calculate its income for the year. The Joneses are in for a major surprise: The good weather and bumper crop have lowered their and other farmers' incomes.
How this can be? The answer lies in the elasticity of demand for foodstuffs. The demands for basic food products such as wheat and corn tend to be inelastic, for these necessities, consumption changes very little in response to price. But this means farmers as a whole receive less total revenue when the harvest is good than when it is bad. The increase in supply arising from an abundant harvest tends to lower the price. But the lower price does not increase quantity demanded very much. The implication is that a low price elasticity of food means that large harvests tend to be associated with low revenue.

Answer Question