The demand for corn increases.As a result,the price of corn ________,and the less elastic the supply of corn,the ________ will be the effect on the price.
A)falls;smaller
B)falls;greater
C)rises;smaller
D)rises;greater
E)None of the above because the change in the price is effected by the price elasticity of demand.

Question

Quizplus · Accepted Answer

According to the law of supply and demand, an increase in demand (the demand for corn increases in this scenario) will result in a higher equilibrium price (the price of corn rises). The effect on the price will depend on the elasticity of supply. If the supply of corn is less elastic, meaning that it cannot be easily increased in response to the increase in demand, the effect on price will be greater (hence, the answer is D, rises; greater).

The Demand for Corn Increases