If a drought increases the price of corn by 10% and decreases the quantity of corn demanded by 5%, then demand for corn is
A) elastic and total revenue to corn farmers will decrease.
B) inelastic and total revenue to corn farmers will decrease.
C) elastic and total revenue to corn farmers will increase.
D) inelastic and total revenue to corn farmers will increase.

Question

Quizplus · Accepted Answer

The demand for corn is inelastic because the percentage change in quantity demanded (5%) is less than the percentage change in price (10%). When demand is inelastic, an increase in price leads to an increase in total revenue.

If a Drought Increases the Price of Corn by 10