Question

Ceteris paribus, if the corn crop is 15 percent larger this year than it was last year, farmers will have to ________ the price of corn by ________ to sell the new crop. raise; more than 15 percent reduce; more than 15 percent reduce; less than 15 percent reduce; exactly 15 percent

Answer 1

Reduce; more than 15 percent

Step-by-step explanation:

Inelastic demand tell us that the percentage change in Quantity demanded will be less than the percentage change in price. So, if the crop is 15 percent larger, farmers will have to decrease the price of corn by more than 15 percent in order to sell the new crop. As the supply has increased and we know that supply and price share an inverse relationship so in order to increase the sales of the new crop price has to be reduced.