Question

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?

a. Total revenue will fall.
b. Total revenue will rise.
c. Not enough information is given to answer the question.
d. Total revenue will remain unchanged.

Answer 1

Revenue will rise.

Step-by-step explanation:

Since the price of tomatoes isn't changing ( all other things remain unchanged ) the demand for tomatoes will not change. If demand doesn't change due to no change in price, more tomatoes should be sold which will increase the total revenue.