When the equilibrium quantity demanded in the market

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Suppose that the demand curve for corn is given by the formula Q =100 - 2P.

a. What is the equilibrium price when the equilibrium quantity demanded in the market is 60 units? Calculate the demand elasticity (using the averaging formula) when the price drops by $1 from that equilibrium. (round to 2 digits)

b. Suppose that irrigation technology for corn improves so that more corn can be produced from each plot of land using the same amount of labour, and labour is the only variable input in the production of corn. What do you expect will happen to the total revenue earned from sales by corn farmers in the new equilibrium compared to the old one, i.e., is it likely to increase, decrease or stay the same? Why? (Hint: Start by considering how supply and/or demand are affected.)

Reference no: EM13997338

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