If we assume that the income elasticity of demand for food has been around 0.2 and that agricultural producers have become increasingly more productive,we can conclude that
A)prices of food have increased.
B)supply increases have been less than demand decreases.
C)as consumers' real incomes have been increasing over the years,they have been spending absolutely less on food.
D)prices of food have been stable.
E)none of the above

Question

Quizplus · Accepted Answer

The income elasticity of demand for food being 0.2 suggests that food is a necessity, and as incomes rise, the proportion of income spent on food decreases, but not the absolute amount. Increased productivity typically leads to lower prices, not higher or stable prices.

If We Assume That the Income Elasticity of Demand for Food