Question

Given that the demand for grains is price-inelastic, we would expect that if the harvest of grains increases significantly, other factors constant, then grain farmers' total revenues would increase
True/False

Answer 1

Answer:

False

Explanation:

FACTORS AFFECTING THE PRICE ELASTICITY OF DEMAND

1) Number and variety of uses of the product:

The higher the number and variety of uses of a good, the greater would be its elasticity of demand. Example of such good is electricity that is used in a number of ways such as use of electricity for the purposes of lighting, ironing, cooking, and also the use electricity as a source of power in various industries.

2) Nature of the Good:

The elasticity of demand for a particular good depends on the nature of the good, i.e., whether the good is a necessary or a an important good. The elasticity of demand for a necessary good is relatively low.

3) Price of the Good:

The elasticity of demand for a good also depends on the price of the product. As price changes, the quantity of the good demanded also changes, owing to the law of demand.

Answer 2

Answer:

The statement is: False.

Explanation:

Inelasticity is a characteristic of certain goods and services by which their quantity demanded does not change in front of changes in price. The inelasticity of demand is calculated by dividing the percentage change of the quantity demanded by the percentage change in price. If the result is lower than one (1) the demand for the product is inelastic.

Thus, if the demand for grains is inelastic, an increase in the harvest of grains will not affect its price neither the demand which implies the profits will not see a change, ceteris paribus.