question
The demand for agricultural products is inelastic, and the income elasticity of demand for agricultural products is low. How do these facts help explain the disappearing family farm?
The family farm has been disappearing because
The family farm has been disappearing because
answer
the demand for food has not increased proportionally with increases in income, and increases in the supply of food have resulted in significant decreases in food prices
question
According to an article in the Wall Street Journal, in 2017, farmers in the United States were facing a fourth consecutive year of falling farm incomes. The article states that a "deepening downturn in the U.S. agricultural economy" was the result of years of bumper harvests.
Source: Jesse Newman, "U.S. Farm Income Seen Falling for Fourth Straight Year," Wall Street Journal, February 7, 2017.
Shouldn't increases in the amount of agricultural products farmers sell be good news for them and raise their incomes? Briefly explain.
Source: Jesse Newman, "U.S. Farm Income Seen Falling for Fourth Straight Year," Wall Street Journal, February 7, 2017.
Shouldn't increases in the amount of agricultural products farmers sell be good news for them and raise their incomes? Briefly explain.
answer
No, an increase in supply is bad news for farmers because the price elasticity of demand for their products is inelastic.
question
The head of the United Kumquat Growers Association makes the following statement.
"The federal government is considering implementing a price floor in the market for kumquats. The government will not be able to buy any surplus kumquats produced at the price floor or to pay us any other subsidy. Because the demand for kumquats is elasticLOADING..., I believe this program will make us worse off, and I say we should oppose it."
Do you agree or disagree with this reasoning?
"The federal government is considering implementing a price floor in the market for kumquats. The government will not be able to buy any surplus kumquats produced at the price floor or to pay us any other subsidy. Because the demand for kumquats is elasticLOADING..., I believe this program will make us worse off, and I say we should oppose it."
Do you agree or disagree with this reasoning?
answer
I agree with this reasoning. Since the demand for kumquats is elastic, the revenues will fall significantly with a price floor.
question
tween 1950 and 2017, the price of wheat fell dramatically from $19.23 per bushel to $3.85 per bushel.
Suppose between 1950 and 2017, the supply of wheat increased substantially due to increases in productivity, shifting the wheat supply curve to the right.
With this supply shift, the amount by which the price of wheat falls will be larger the more inelastic the demand for wheat.
In addition, assume that between 1950 and 2017 the income of the average American increased substantially and that wheat is a normal good.
With this increase in income,
Suppose between 1950 and 2017, the supply of wheat increased substantially due to increases in productivity, shifting the wheat supply curve to the right.
With this supply shift, the amount by which the price of wheat falls will be larger the more inelastic the demand for wheat.
In addition, assume that between 1950 and 2017 the income of the average American increased substantially and that wheat is a normal good.
With this increase in income,
answer
the amount by which the price of wheat rises will be smaller the lower the income elasticity of wheat.
question
From 1950 to 2012, wheat production in the United States increased dramatically, resulting in a substantial decline in wheat prices. Two key factors explaining this decline in prices are that the demand for wheat is ________, and the income elasticity of demand for wheat is ________.
answer
price inelastic; low
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