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Suppose people buy 100 million bushels of wheat per year at a price of $3 per bushel Total expenditure on wheat are $300 million Suppose also that the price elasticity of demand for wheat is

Suppose people buy 100 million bushels of wheat per year at a price of $3 per bushel. Total expenditure on wheat are $300 million. Suppose also that the price elasticity of demand for wheat is -0.5 (demand is inelastic). If the price of wheat rises to $3.60 per bushel (a 20 percent increase), quantity demanded will fall by 10 percent (to 90 million bushels). The net result of these actions is to increase total expenditures on wheat from $300 million to $324 million. Because the quantity of wheat demanded is not very responsive to changes in price, total revenues are increased by a price rise. Please, help me step by step to understand better how to put it into an equation and calculate it. How is everything calculated?

Apr 05 2020 View more View Less

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