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Paradox of Plenty, with Special Reference to Inelastic Demand for Apples

Monika Jain

The IUP Journal of Managerial Economics, 2011, vol. IX, issue 2, 44-55

Abstract: Paradox of plenty in agriculture implies that a bumper crop reaped by the farmers brings a smaller total income to them. The fall in the income or revenue of the farmer as a result of the bumper crop is due to the fact that with greater supply the prices of the crop decline drastically and in the context of inelastic demand for them, bring about fall in the income of the farmers. Thus, bumper crop, instead of raising their incomes, reduces them. The reason for this lies in the elasticity of demand for food stuff. The demand for food stuff is fairly inelastic. An increase in their supply tends to lower their price. The lower price does not increase the demand for it as per the law of demand or a normal price-demand relationship. Thus large harvest tends to bring low revenue to the farmers.

Date: 2011
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Handle: RePEc:icf:icfjme:v:09:y:2011:i:2:p:44-55