managerial economics - price inelastic demand?

Agricultural commodities are known to have a price inelastic demand and to be necessities. How can this information allow us to explain why the income of farmers fall after a good harvest?and in relation to the incomes in other sectors of the economy?

5 Answers

Relevance
  • Anonymous
    7 years ago
    Best Answer

    Price inelastic demand means if price falls, the percentage increase in quantity demand will be smaller the percentage change in price. Farmer income will decline. At the same time, if income increase, people will not increase foods that much,but more luxury goods.

  • 7 years ago

    What the term means is that for every change in price, the change in demand is smaller in proportion. Analysing the situation, I believe that a good harvest means supply increases, thus prices decrease. Technically, this should entail greater demand.

    However, the inelasticity of agricultural goods causes demand to only increase by a little, profits decline and the income of farmers suffers as well. Incomes in other sectors should increase given that agricultural goods are now cheaper.

  • horam
    Lv 4
    3 years ago

    Ok, when you consider that the cost for plastic surgery is INelastic, that means that the demand won't change established on price. A. False, when you consider that rate expand won't affect demand b. False, seeing that the alternate in the fee might be more than trade well-known, considering that demand is not going to trade c. Genuine, definition of inelastic d. False, reverse of inelastic i'm no longer certain about e and f

  • 7 years ago

    Price inelastic:

    * Price rise -> demand does fall much.

    Price fall -> demand does not rise much.

    Therefore even when price fall due to increase in supply demand does not rise in the same proportion. * For agricultural products- supply is fixed and can't be adjusted and option for carryover is very limited . Surplus supply further puts pressure on price to fall.

  • How do you think about the answers? You can sign in to vote the answer.
  • Anonymous
    7 years ago

    cccc

Still have questions? Get your answers by asking now.