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What are the weaknesses of Cobweb Theory?

      

What are the weaknesses of Cobweb Theory?

  

Answers


Wilfred
1. It assumes that products (former) are irrational and hence base their production decision on the previous prices without thinking of price changes but this is rather unrealistic because in reality farmers always think about changes in prices in the future.

2. The theory also assumes that all the quantity produced is sold in the market but this is also unrealistic because in the true sense some agricultural products are assumed for subsistence needs while others are stored waiting for sale in the future when prices are considered high.

It is thus clear from the previous discussion that the elasticity of demand depends not
only on the ratio of price to quantity demanded, but also on the slope of the demand
curve.
Wilfykil answered the question on March 6, 2019 at 07:27


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