When the price of wheat was $3 per bushel, quantity demanded for wheat was 1.85 million bushels. When the price of wheat rose to $3.50 per bushel, quantity demanded for wheat was 1.75 million bushels. a) Calculate the own-price elasticity of demand for wheat
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Mauya M.
In the United States, 2013 was a bad year for growing wheat. And as wheat supply decreased, the price of wheat rose dramatically, leading to a lower quantity demanded (a movement along the demand curve). The accompanying table describes what happened to prices and the quantity of wheat demanded. $$ \begin{array}{l|c|c} & 2012 & 2013 \\ \text { Quantity demanded (bushels) } & 2.2 \text { billion } & 2.0 \text { billion } \\ \text { Average price (per bushel) } & \$ 3.42 & \$ 4.26 \end{array} $$ a. Using the midpoint method, calculate the price elasticity of demand for winter wheat. b. What is the total revenue for U.S. wheat farmers in 2012 and $2013 ?$ c. Did the bad harvest increase or decrease the total revenue of U.S. wheat farmers? How could you have predicted this from your answer to part a?
Andrew D.
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