Question

How will the long-run adjustment of Egyptian cotton supply from elimination of the subsidy likely affect the number of suppliers - that is, Egyptian cotton farmers? Explain.

Short answer

Explanation for long-run adjustment of Egyptian cotton is given.

Step-by-step solution

Long-run adjustment of Egyptian cotton supply:

Many individuals who have a look at international cotton markets, however, contend that the long-run charge elasticity of deliver is even better than $1.89$. Some factor out that different Egyptian vegetation have a better go back for farmers with inside the absence of subsidies. Others notice that Egypt is also an urban, increasingly industrialized country with various alternative land uses.

Therefore, these observers argue that the price elasticity of Egypt's cotton supply will continue to increase after a long-term adjustment to lower cotton prices due to subsidy cuts. The end result predicts that the cotton supply will decline even more significantly. It was supplied by Egyptian farmers in response to the abolition of subsidies.