Suppose that a hurricane destroys part of the tobacco crop in North Carolina

What willhappen to the price of tobacco? What will happen to the marginal product of tobacco field workers as a result of the hurricane? Can we tell what will happen to the demand for tobacco field workers? Explain.

As a result of the hurricane, the supply of tobacco will fall and the price of tobacco will rise. Because there is less tobacco to work in the fields, the marginal product of tobacco field workers will fall. This means that we are unable to tell what will happen to the demand for tobacco field workers. The increase in the price of tobacco raises the marginal revenue product of the field workers, while the drop in marginal product lowers the workers' marginal revenue product. The end result on the demand for labor will depend on which change is larger.