Question

2. Unstable export markets Sometimes the exports of developing nations are concentrated in only one or a few primary products. For example, according to World Bank data, tobacco constitutes 50% of Malawi's total exports Therefore, changes in demand or supply of tobacco can ha esign ficant effects on the health of Malawi's economy The current world price of tobacco is $5.00 per pound, but there is uncertainty about the shape of the demand and supply curves. The following graphs (scenario A and scenario B) show two possibilities for demand and supply in the market for tobacco Suppose that an adoption of healthier lifestyles in advanced countries leads to a fall in the global demand for tobacco On the following graph, shift the demand or supply curve of scenario A to show what happens in the market for tobacco as a result of this event. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.

*Both curves have not been adjusted, they are in the state that the question gave me.*

Updated Demand Curves:

Answer 1

The demand for tobacco from importing countries falls due to the adoption of a healthier lifestyle. This will have an impact on the demand curve. The demand curve will face a leftward shift because of the reduction in the demand from the countries. The curve shifts because there is a change in the demand for the product because of a factor other than price. The changes in the graph due to change in demand for tobacco is given below: Scenario A Scenario B Supply PRICE (Dolars) PRICE (Dollars) QUANTITY (Pounds of tobacco) QUANTITY (Pounds of tobacco) Since, the demand for tobacco fall, the world price of tobacco will also fall. Scenario A Original Price 5.00 5.00 New Price 2.5 (approx.) | 4.25 (approx.) І в Because the supply of tobacco is less elastic in scenario B versus scenario A, changes in demand cause less volatile price fluctuation for Malwi under scenario B because inelasticity of supply leads to low adjustment of price level after the change in demand. Hence, the given statement is True.