If real income rises in the economy and,at the same time,productivity in the agriculture sector rises,too,then it follows that the demand for food will
A)rise (assuming that income elasticity of demand for food is greater than 1)and the supply of food will remain constant.
B)rise (assuming that income elasticity of demand for food is greater than 0)and the supply of food will increase,too.
C)fall (assuming that income elasticity of demand for food is greater than 1)and the supply of food will fall,too.
D)fall (assuming that income elasticity of demand for food is equal to 1)and the supply of food will rise.
E)none of the above

Question

Quizplus · Accepted Answer

When real income rises, demand for food generally increases (assuming income elasticity of demand for food is greater than 0). If productivity in the agriculture sector also rises, this will increase the supply of food, leading to an increase in both demand and supply. Therefore, answer choice B is the best option. Answer choice A is incorrect because it assumes the supply of food will remain constant. Answer choice C is incorrect because it assumes both demand and supply will fall. Answer choice D is incorrect because it assumes demand will fall when income elasticity is equal to 1, which is not necessarily true.

If Real Income Rises in the Economy And,at the Same