The demand for agricultural output is price inelastic.This means that if farmers, taken collectively, have a bumper crop, they will experience:
A) lower prices, greater quantities sold, and lower incomes.
B) higher prices, greater quantities sold, and higher incomes.
C) lower prices, quantities sold, and incomes.
D) higher prices, quantities sold, and incomes.

Question

Quizplus · Accepted Answer

When demand is price inelastic, a significant increase in supply (such as from a bumper crop) leads to a proportionally larger decrease in price. Because the demand does not increase much with the lower price, the total revenue (price x quantity) for farmers decreases, leading to lower incomes despite selling greater quantities.

The Demand for Agricultural Output Is Price Inelastic