Fluctuations in agricultural prices, according to the cobweb theorem, occur because of:
A) the inelastic nature of the demand curve for food.
B) changes in government price supports.
C) changes in the consumer demand for food in other nations.
D) fluctuations in the supply of the product.

Question

Quizplus · Accepted Answer

The cobweb theorem explains that fluctuations in agricultural prices occur due to time lags in the supply response to price changes, leading to cycles of overproduction and underproduction.

Fluctuations in Agricultural Prices, According to the Cobweb Theorem, Occur