Question

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:
A) the demand for peanuts is elastic.
B) the demand for peanuts is inelastic.
C) the demand curve for peanuts has shifted to the right.
D) no inference can be made as to the elasticity of demand for peanuts.

Answer 1

Answer:

A) the demand for peanuts is inelastic          

Explanation:

Since in the question it is given that the price of peanuts is fall fro $3 to $2 per bushel which shows the decreased in price while at the same time the revenue received is also decreased from $16 to $14 that results in demand for peanuts is inelastic          

As we know that

Inelastic = When elasticity is less than one

So in the given case since the price and revenue received is decrease therefore the demand is inelastic