Economics 6(3,4,5,6)
The family farm has been disappearing because
the demand for food has not increased proportionally with increases in income, and increases in the supply of food have resulted in significant decreases in food prices. Your answer is correct.D.
Is it possible to tell from the income elasticity of demand whether a product is a luxury good or a necessity?
Yes. If the income elasticity of demand is greater than 1, then the good is a luxury. If the income elasticity of demand is positive but less than 1, then the good is a necessity.
In a recession, sales of a good with
an income elasticity of demand greater than one will decline the most and sales of a good with an income elasticity of demand less than zero will increase the most.
If the cross-price elasticity of demand is negative, then the products are:
complements, but if it is positive, then the products are substitutes
For a normal good, the income elasticity of demand will be
positive, but for an inferior good, the income elasticity of demand will be negative.
Income elasticity of demand is
the percentage change in quantity demanded divided by the percentage change in income.
The cross-price elasticity of demand is
the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.
The formula for the price elasticity of supply is
the percentage change in quantity supplied divided by the percentage change in price.