The price elasticity of demand for lettuce has been estimated to be -2.58.If an insect infestation destroys 10 percent of the nation's lettuce crop, how will that affect total expenditures on lettuce, all other things unchanged?
A) total expenditures will remain unchanged
B) total expenditures will fall
C) total expenditures will rise
D) not enough information is given to answer the question

Question

Quizplus · Accepted Answer

With the given price elasticity of demand (-2.58), we can conclude that demand for lettuce is elastic. This means that a small change in price or quantity can cause a significant change in total expenditures. A 10% decrease in the nation's lettuce crop will likely cause an increase in the price of lettuce. Given the elasticity estimate, total expenditures on lettuce will fall as the price of lettuce rises.

The Price Elasticity of Demand for Lettuce Has Been Estimated