Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 5 - Part II - Elasticity and its Application - Problems and Applications - Page 110: 12

Answer

Grain is a food, and food is a necessity. Necessities have inelastic demand curves. Worldwide, if supply falls, prices will increase (with a decrease in quantity).

Work Step by Step

In Kansas, other farmers (in other states) can increase production when there is a decrease in the quantity of grain. Thus, there is no price change, and Kansas farmers sell less grain at the normal price. The lower quantity of grain leads to the lower revenue for Kansas farmers.
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