Suppose that when the price of corn is $2 per bushel,farmers can sell 12 million bushels.When the price of corn is $3 per bushel,farmers can sell 10 million bushels.Which of the following statements describes what will happen and why
A)The demand for corn is income inelastic, and so an increase in the price of corn will increase the income of corn farmers.
B)The demand for corn is income elastic, and so an increase in the price of corn will increase the income of corn farmers.
C)The demand for corn is price inelastic, and so an increase in the price of corn will increase the income of corn farmers.
D)The demand for corn is price elastic, and so an increase in the price of corn will increase the income of corn farmers.

Question

Quizplus · Accepted Answer

The fact that the quantity demanded of corn decreases from 12 million bushels to 10 million bushels when the price increases from $2 to $3 indicates that the demand for corn is price inelastic. Therefore, an increase in the price of corn will lead to an increase in the income of corn farmers because the decrease in quantity demanded will not be significant enough to offset the increase in price, resulting in a net increase in revenue for the farmers. Option A and B are incorrect because the question does not provide any information regarding the income elasticity of demand for corn. Option D is incorrect because the question explicitly states that the demand for corn is price inelastic.

Suppose That When the Price of Corn Is $2 Per