Extensive flooding in the Midwest decreases the world supply of corn. If corn is inelastically demanded, what will happen to total revenues from corn production?
A) They will rise.
B) They will fall.
C) They will remain the same.
D) They will change in an indeterminate direction.

Question

Quizplus · Accepted Answer

Inelastic demand means that changes in price have a relatively small effect on the quantity demanded. Since the world supply of corn has decreased due to flooding, the demand for corn is still relatively high and buyers are willing to pay a higher price. Therefore, the total revenues from corn production will rise even if the quantity of corn sold decreases.

Extensive Flooding in the Midwest Decreases the World Supply of Corn