Because the demand for wheat tends to be inelastic, falling wheat prices would tend to: a

Economics Dec 13, 2020

Because the demand for wheat tends to be inelastic, falling wheat prices would tend to:

a. increase the total revenue of wheat farmers,

b. decrease the total revenue of wheat farmer,

c. decrease the demand for wheat,

d. decrease the supply of wheat.

Expert Solution

Answer: B

When demand is inelastic, quantity demanded doesn't change as much as prices do in terms of percent. Since revenue is quantity multiplied by price, a smaller increase in quantity than the fall in price (again in percent terms) results in revenue falling. The answer is thus B.

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