1. If the elasticity of demand curve for millet is -0.5 at all prices higher tha

Question

1. If the elasticity of demand curve for millet is -0.5 at all prices higher than the current price, we would expect that when bad weather reduces the size of the millet crop, total revenue of millet producers will fall.

2. If the elasticity of demand curve for buckwheat is -0.75 at all prices higher than the current price, we would expect that when bad weather reduces the size of the buckwheat crop, total revenue of buckwheat producers will fall.

3. If the equation for the demand curve is q = 50-1p; then the ratio of marginal revenue to price is constant as price changes.

4. If the demand function is q = 3m=p; where m is income and p is price, then the absolute value of the price elasticity of demand decreases as price increases.

those answers are all false. I don't know why....

Explanation / Answer

1. False.

Bad weather shifts supply curve leftwards and leads to increase in price of commodity. Ed = 0.5 < 1 i.e. inelastic demand. So, increase in price leads to increase in TR.

2. False.

Bad weatherr shifts supply curve leftwards and leads to increase in the price of commodity. Ed = 0.75 < 1 i.e. inelastic demand. So, increase in price causes increase in total revenue.

3. q = 50 - p

TR = p.q = p(50 - p) = 50p - p2

MR = dTR/dq = 50 - 2p

So, change in price leads to change in MR. Given statement is False.

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