r each of the following scenarios, what would happen to total revenue after a pr
ID: 1135979 • Letter: R
Question
r each of the following scenarios, what would happen to total revenue after a price increase? Place each scenario in the correct tegory. Items (5 items) (Drag and drop into the appropriate area below) Coffee drinkers say there is no substitute. Brazil hasa drought Leaf rust damages one- third of the world's coffee Coffee drinkers Coffee drinkers discover a favor decide to save of tea that tastes their money for like coffee.a alcohol on Friday nights. crop. ategories Increase Total Revenue Decrease Total Revenue Drag and drop here Dras and drop hereExplanation / Answer
1.
Coffee drinkers say that there is no substitute. When the price of coffee increase as there is no substitute, demand for coffee will be inelastic and consumers will have to buy the good. Hence revenue would increase as price increases.
2.
Brazil has a drought so total production would be affected as it will be an economic shock and supply will get constraint. Total revenue would decrease.
3.
Leaf rust damages one-third of the world's coffee crop then it would affect the supply of coffee as the crop is damaged result into a shortage of coffee when price increases quantity supplied is low and rise in price would not increase revenues.
4.
Coffee drinkers discover a flavor of tea that tastes like coffee. In that case, it will act as a substitute for coffee. Hence when the price of coffee rises consumer would shift to the flavor of tea and the demand for that good would rise and result in an increase in total revenue.
5.
Coffee drinkers decide to save money for alcohol Friday nights. Here alcohol also acts as a substitute as money is being saved or not spend on coffee as coffee becomes expensive hence total revenue would increase when there are other substitutes of a good.
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