Given the typical price elasticity of demand for food,a poor harvest should,ceteris paribus,lead to
A)Lower prices but higher total revenues.
B)Higher prices but lower total revenues.
C)Lower prices and lower total revenues.
D)Higher prices and higher total revenues.

Question

Quizplus · Accepted Answer

The typical price elasticity of demand for food is inelastic, meaning that the percentage change in quantity demanded is less than the percentage change in price. Therefore, a poor harvest, which reduces supply, should lead to higher prices. Because demand is inelastic, the total revenue (price x quantity) increases despite the decrease in quantity sold.

Given the Typical Price Elasticity of Demand for Food,a Poor