Describe the short-run situation in U.S. agriculture. What are its causes?
What will be an ideal response?
In the short run, there are frequent changes in the incomes of farmers from one year to the next. One cause is the inelastic demand for farm products. This elasticity of demand for farm products is about 0.20 to 0.25, which means that a 40 to 50 percent fall in price would be necessary to get a 10% increase in the quantity demanded for farm products. Another cause is fluctuations in output from year to year. Given the inelastic demand, small changes in output result in large changes in farm incomes. Bumper crops reduce farm incomes for all farmers and poor crops increase farm incomes for those farmers that are able to produce. A third cause is fluctuations in domestic demand. A slight fall in demand can produce a large fall in income whereas an increase in demand can cause a sharp rise in income. This volatility is again the result of the inelastic demand for farm products. Finally, American agriculture has become increasingly dependent on foreign demand for agriculture products. This foreign demand also fluctuates and can be more unstable than domestic demand.
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Due to a recent hurricane there is a major loss of sugarcane crops. At the same time in the U.S. consumers are eating healthier and cutting back on eating items that have sugar in them. How will this affect the price and quantity in the sugar market?
A. Price increases and quantity is indeterminate B. Quantity increases and price is indeterminate C. Quantity decreases and price is indeterminate D. Price decreases and quantity is indeterminate
Assume that the demand curve for DVD players shifts to the left and the supply curve for DVD players shifts to the right, but the supply curve shifts less than the demand curve. As a result
A) both the equilibrium price and quantity of DVD players will decrease. B) the equilibrium price of DVD players will decrease; the equilibrium quantity may increase or decrease. C) the equilibrium price of DVD players may increase or decrease; the equilibrium quantity will increase. D) the equilibrium price of DVD players will decrease; the equilibrium quantity will increase.
Economic theory predicts that the price of a depletable resource will rise as it becomes more scarce.
Answer the following statement true (T) or false (F)
Real income for a given year would be less than nominal income in that year if:
A. the consumer price index was less than 100 in that year. B. nominal income in that year was greater than nominal income in the previous year. C. nominal income in that year was less than nominal income in the previous year. D. the consumer price index was greater than 100 in that year.