If the elasticity of demand curve for barley is -1.50 at all prices higher than the current price, we would expect that when bad weather reduces the size of the barley crop, total revenue of barley producers will fall.

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Quizplus · Accepted Answer

If the elasticity of demand curve is less than 1, as in this case (1.50), we can say that demand is inelastic. This means that a decrease in supply (due to bad weather reducing the barley crop) would lead to a proportionally smaller decrease in quantity demanded, resulting in an increase in price. As a result, total revenue of barley producers might not necessarily fall, as the increase in price may offset the decrease in quantity demanded.

If the Elasticity of Demand Curve for Barley Is -1