Demand for farm products, in general, is said to be relatively price inelastic. Therefore, U.S. farm policy, which is designed to keep farm prices above equilibrium, should
A) decrease farm incomes
B) increase farm incomes
C) not affect farm incomes
D) reduce the number of farmers
E) lower food prices for consumers

Question

Quizplus · Accepted Answer

Since demand for farm products is relatively price inelastic, increasing prices through policy measures (keeping prices above equilibrium) generally leads to an increase in farm incomes. This is because the percentage decrease in quantity demanded is less than the percentage increase in price, leading to higher overall revenue for farmers.

Demand for Farm Products, in General, Is Said to Be