question archive An increase in the supply of a good will decrease the total revenue producers receive if: a
An increase in the supply of a good will decrease the total revenue producers receive if: a
Subject:EconomicsPrice:2.88 Bought3
An increase in the supply of a good will decrease the total revenue producers receive if:
a. The demand curve is inelastic,
b. The demand curve is elastic,
c. The supply curve is inelastic,
d. The supply curve is elastic.
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Answer: A
An increase in supply causes prices to fall but quantity to rise. Thus, revenue will decrease only if the percent change in quantity is less than the percent change is price. This would require the demand curve to be inelastic as shifting the supply curve simply takes us from one point of the demand curve to the next. The answer is thus A.
