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In the United States, 2007 was a bad year for growing wheat. And as wheat supply decreased, the price of wheat rose dramatically, leading to a lower quantity demanded (a movement along the demand curve). The accompanying table describes what happened to prices and the quantity of wheat demanded.
2006 2007
Quantity demanded (bushels) 2.2 billion 2.0 billion
Average price (per bushel) $3.42 $4.26
a. Using the midpoint method, calculate the price elasticity of demand for winter wheat.
b. What is the total revenue for U.S. wheat farmers in 2006 and 2007?
c. Did the bad harvest increase or decrease the total revenue of U.S. wheat farmers? How could you have predicted this from your answer to part a?
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