The price of wheat has fallen since 1950.Which of the following explains this price decline?
A)The price elasticity of demand is less than 1 (in absolute value)and the income elasticity of demand for wheat is low.
B)The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is low.
C)The price elasticity of demand is less than 1 (in absolute value)and wheat is an inferior good.
D)The price elasticity of demand is greater than 1 (in absolute value)and the income elasticity of demand for wheat is greater than 1.

Question

Quizplus · Accepted Answer

When the price elasticity of demand is less than 1, demand is inelastic, meaning consumers do not significantly reduce their quantity demanded as prices fall. Additionally, a low income elasticity of demand indicates that changes in income do not significantly affect the quantity demanded. Together, these factors can lead to a decline in price as supply increases or remains constant while demand does not increase proportionately.

The Price of Wheat Has Fallen Since 1950