Question

The quantity of almonds harvested in​ 2008-2009 is expected to increase by 22​ percent, while total receipts of growers are expected to increase by 17 percent. ​source: almond board of california if the price of almonds changed as a result of a change in the supply of​ almonds, is the demand for almonds elastic or​ inelastic? Explain your answer. If the price of almonds changed as a result of a change in the supply of​ almonds, the demand for almonds is​ ______ because, using the total revenue​ test, price and total revenue change in​ ______.

Answer 1

Answer: Elastic, opposite direction

Explanation: When supply of almonds increases it leads to a fall in the price of almonds in the market. A rise in quantity by 22% leads to a rise in total revenue by only 17%, this is because of the fall in price of almonds. Thus, as price and total revenue move in opposite directions, demand for the good is elastic.

Total revenue test shows that if an increase in price causes an increase in total revenue, then demand can be said to be inelastic. If a decrease in the price lead to a decrease in total revenue demand is elastic.