One of the growers is pleased with the price increase caused by the pests because he believes it will lead to increased revenue. Using elasticities, you
will be able to determine whether this price change will lead to a rise or fall in total revenue in this market.
Using the midpoint method, the price elasticity of demand for pistachios between the price levels of $20 and $28 per ton is
between these two points, demand is
. Thus, you can conclude that the grower's claim is
due to the pestilence.
4
Confirm your previous conclusion by calculating total revenue in the pistachio market before and after the pestilence. Enter these values in the
following table.
Total Revenue (Millions of Dollars)
C
i
Before Pestilence After Pestilence
&
, meaning that
because total revenue will
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