According to the Law of Supply, if price increases, there is an incentive for producers to produce more, and therefore the quantity supplied increases. However, for an inelastic good, if there is a supply shock and supply significantly increases, why is there a drop in price? Can't the suppliers sell their product at the same or a higher price to increase total revenue?
Low price elasticity of demand, together with fluctuations in supply over short periods of time, creates serious problems for primary commodity producers, because they result in large fluctuations in primary commodity prices, and these also affect producers’ incomes. A good crop resulting in a supply increase leads to lower prices and lower farmers’ revenues. We come, therefore, to the ironic conclusion that a poor crop may be good for farmers because it increases their revenues while a good crop may be bad for them. Can't the farmers sell their product at the same or a higher price to increase total revenue?