Question

Suppose the price of barley increases by 16.53%. If breweries buy 3.28% less barley after the price increase, the total revenue for barley producers will _____ because the _____ effect is greater than the _____ effect. not change; quantity; price decrease; quantity; price increase; quantity; price increase; price; quantity

Answer 1

Answer:

The total revenue for barley producers will increase because the price effect is greater than the quantity effect.

Correct option is D.  increase; price; quantity

Explanation:

Price effect (which is the impact that a change has on prices) in the scenario above is greater than Quantity effect (a reduction in commodities sold after an increase in price).

Since breweries still buy below the percentage of the Price effect, the revenue of barley sellers will continue to increase.

However, the revenue will start to decrease when the quantity effect exceeds the price effect.