Assume that the market for barley is in equilibrium and the demand for barley is inelastic.Predict what happens to the revenue of barley farmers if a prolonged drought reduces the supply of barley.The drought will cause farm revenue to
A)rise because there will be a shortage of barley.
B)rise because the percentage decrease in quantity sold is less than the percentage increase in price.
C)rise because the percentage increase in quantity sold is greater than the percentage increase in price.
D)fall because of the decrease in the quantity of barley sold.

Question

Quizplus · Accepted Answer

When demand is inelastic, a decrease in supply leads to a higher price, and the percentage increase in price is greater than the percentage decrease in quantity sold, resulting in increased total revenue for farmers.

Assume That the Market for Barley Is in Equilibrium and the Demand