Increases in farm productivity have lowered the prices of many agricultural products. Farm revenues decreased, which implies that the:
A) demand for many agricultural products is inelastic.
B) costs of production increased.
C) demand for many agricultural products is elastic.
D) costs of production stayed the same.

Question

Quizplus · Accepted Answer

When farm productivity increases and prices fall, if revenues decrease, it implies that the demand is inelastic. This is because the percentage drop in price leads to a smaller percentage increase in quantity demanded, resulting in lower total revenue.

Increases in Farm Productivity Have Lowered the Prices of Many