When agricultural production increases , the total amount paid for agricultural products tends to

a. increase because demand is price elastic
b. decrease becasue deamn is price elastic
c. increase because demand is price inelastic
d. decrease because demand is price inelastic .
e. remain constant because demand is price inelastic

I looked online and it said the answer is D. But I'm having trouble figuring how they got that answer.

Okay..ive spend forever trying to figure this out. I have two explanations

First one: If im not mistaken, when it says "total amount paid for agricultural products" its referring to total revenue. and i figured out that if production increases price increases too right..so based on these two conclusion i figured out this :
I looked at the linear demand curve and it shows that when demand is elastic total revenue will decrease if the price increases and when demand is inelastic total revenue will increase if price increases. So from this I can get either answer b or c and theres no option for both b and c. so i know im doing this wrong. If someone could please explain this to me clearly and elaborately id appreciate it. Thank you..Hope you didn't get lost while reading this. Looking at the linear demand curve will help you understand what im trying to say = )

My other explanation is
that when the production increases the supply curve increases and demand curve stays the same and then this causes total revenue to decrease?

In b. check the spelling of "demand."

This is about "supply and demand." When the supply is short/scarce, demand increases but when the supply is great, the demand decreases.

As I do not see the demand linear curve, I don't know what you see. Be sure in your explanation (if that was what you were to do) that you check all the spelling, punctuation, etc.

Sra

hey there, i am learning microecomonic right now too.

according to the book, for inelastic demand, an decrease in price will lead to a proportionately smaller increase in the quantity demanded and so the TR will fall.

in your case, i think When agricultural production increases and the demand is inelastic, so there's more things being produced and about the same amount of people consuming the lot, there for there's too much things being produced,and total revenue will therefore fall.

I can understand why you're having trouble understanding this concept. Let me explain it in detail to help you understand why the answer is (d) decrease because demand is price inelastic.

First, let's understand the definitions of price elasticity of demand and price inelasticity. Price elasticity of demand measures how responsive the quantity demanded of a good is to changes in its price. If the demand is price elastic, it means that a change in price leads to a proportionally larger change in quantity demanded. On the other hand, if the demand is price inelastic, it means that a change in price leads to a proportionally smaller change in quantity demanded.

Now, when agricultural production increases, there is likely to be more supply of agricultural products in the market. If the demand for agricultural products remains constant, the equilibrium price will decrease due to an excess supply. However, the question mentions that the total amount paid for agricultural products tends to decrease, not the price. This suggests that the decrease in the total amount paid is not solely due to a decrease in price.

In this scenario, the decrease in the total amount paid for agricultural products can be attributed to the fact that the demand for agricultural products is price inelastic. Price inelastic demand means that consumers are not very responsive to changes in price. When the supply increases, and price decreases, the decrease in price does not lead to a proportionally larger increase in quantity demanded. As a result, even with more agricultural products available at lower prices, the total amount paid decreases because the increase in quantity demanded is not sufficient to offset the decrease in price.

To summarize, when agricultural production increases, and the demand for agricultural products is price inelastic, the total amount paid for agricultural products tends to decrease because the increase in supply leads to a decrease in price, but the increase in quantity demanded is not significant enough to compensate for the price decrease. Therefore, the correct answer is (d) decrease because demand is price inelastic.