Question

If demand is inelastic, a drought around the world would ___the total revenue that farmers receive from the sale of grain.

Why would a drought only in Kansas most likely reduce the total revenues that Kansas farmers receive?

a. A drought in Kansas would significantly raise the worldwide price of grain.

b. A drought in Kansas would significantly lower the worldwide price of grain.

c. A drought in Kansas is not significant enough to affect the worldwide price of grain.

Answer 1

Answers:

1) The correct word for the blank space is: raise.

2) The correct answer is letter "C": A drought in Kansas is not significant enough to affect the worldwide price of grain.

Step-by-step explanation:

1) Demand inelastic goods or services are those with demands that do not vary after changes in their prices. In front of a drought around the world, the supply of grains will fall but if the demand is inelastic people would still request grains at the same level. It implies farmers would still have revenue but incurring in fewer production costs.

2) If a drought only affects the farms in Kansas, there will be less supply of grains grew in Kansas but consumers could request the grains from other territories that are not affected by the drought. Thus, the revenue from Kansas' farmers will be reduced but it will not affect the price of grains around the world.

Answer 2

Raises ;

C. A drought in Kansas is not significant enough to affect the worldwide price of grain.

Step-by-step explanation:

Drought is a situation where there is shortage of water due to prolong absence of rainfall.

This is because, when Kansas has a drought, purchasers or buyers can substitute wheat from other places for Kansas wheat.

But, when the whole world has a drought, purchasers or buyers have no other suppliers of wheat to substitute. This means that, no area will have wheat so that the buyers can buy, because every area will be affected by the drought.

In this case,the demand for wheat is inelastic in the short run.