Ask Question
3 October, 20:13

Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, what would happen to total revenue for peanut farmers who were not affected by the drought?

+4
Answers (1)
  1. 3 October, 21:32
    0
    Since the price of peanuts increased by 20% and the price elasticity of demand is 0.8, then the quantity demanded will decrease by 16%.

    Since the decrease in quantity demanded is proportionally smaller than the increase in price, then total revenue for farmers not affected by the drought should increase.

    E. g. 100 pounds of peanuts sold at $10 per pound, total revenue = $1,000

    price increased to $12 (20% increase) and quantity demanded decreased to 84 pounds.

    total revenue = $12 x 84 pounds = $1,008
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Due to a drought in Georgia, the market price for peanuts rises by 20% nationwide. If the price elasticity of demand for peanuts is 0.8, ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers