Since 1950, there has been a substantial increase in wheat production.The increase in production has led to a decrease in the price of wheat because of which of the following factors?
A)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is greater than 1.
B)The absolute value of the price elasticity of demand for wheat is greater than 1 and wheat is a close substitute for other food products.
C)The absolute value of the price elasticity of demand for wheat is less than 1 and the income elasticity of demand for wheat is low.
D)The income elasticity of demand for wheat is high and wheat is an inferior good.

Question

Quizplus · Accepted Answer

When the price elasticity of demand is less than 1, demand is inelastic, meaning that an increase in supply leads to a proportionally smaller increase in quantity demanded, causing prices to fall. Additionally, a low income elasticity of demand indicates that changes in income have little effect on the quantity demanded, reinforcing the price drop.

Since 1950, There Has Been a Substantial Increase in Wheat