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The price elasticity of demand for fresh tomatoes has been estimated to be 2.22. If a new insecticide and fertilizer treatment yields a 20% increase in the nation's fresh tomato crop, how will that affect total revenue from fresh tomatoes, all other things unchanged?

Respuesta :

Answer:

Total revenue will rise.

Explanation:

A coefficient of elasticity of 2.22 implies that demand is elastic.

Demand is elastic if a small change in price has a greater effect on the quantity demanded.

If there's a 20% increase in the nation's yield of fresh tomato crop, supply would increase. As a result of the increase in supply while demand remains unchanged, there would be a surplus. As a result of the surplus, equilibrium prices would fall and quantity would rise.

As a result of the fall in price, quantity demanded would increase because demand is elastic. If demand increases, total revenue would rise.

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