Suppose the price elasticity of demand for oranges is 1.8.If a fall frost destroys one-third of the nation's orange crop,how will that affect total revenue from oranges,all other things unchanged?

A) Total revenue will rise.
B) Total revenue will fall.
C) Total revenue will remain unchanged.
D) The information is insufficient to answer the question.

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Bipin Kharel · Accepted Answer

Final Answer : B, Explanation :  A decrease in supply due to the frost will lead to an increase in price, but the price elasticity of demand being 1.8 implies that the quantity demanded will also decrease by a proportionately larger amount. As a result, the decrease in quantity demanded will more than offset the increase in price, leading to a decrease in total revenue from oranges.

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