ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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good for farmers because it raises prices for their products but bad forconsumers because it raises prices consumers pay for food.
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bad for farmers because total revenue will fall but good for consumersbecause prices for food will fall.
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good for farmers because it raises prices for their products and alsogood for consumers because more output is available for consumption.
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bad for farmers because total revenue will fall and bad for consumersbecause farmers will raise the price of food to increase their total revenue.
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Detailed explanation-1: -Technological improvements in agriculture that shift the supply of agricultural commodities to the right tend to: Reduce total revenue to farmers as a whole because the demand for food is inelastic.
Detailed explanation-2: -When demand is price inelastic, a given percentage change in price results in a smaller percentage change in quantity demanded. That implies that total revenue will move in the direction of the price change: a reduction in price will reduce total revenue, and an increase in price will increase it.
Detailed explanation-3: -If demand for a product is price elastic and the price increases, total revenue will decrease. If demand for a product is price inelastic and the price decreases, total revenue will decrease.
Detailed explanation-4: -Finally, when the percentage change in quantity demanded is equal to the percentage change in price, demand is said to be unit elastic. In this case, a price increase or decrease does not change total revenue.