Question

From 1950 to​ 2012, wheat production in the united states increased​ dramatically, resulting in a substantial decline in wheat prices. two key factors explaining this decline in prices are that the demand for wheat is​ ________, and the income elasticity of demand for wheat is​ ________.

Answer 1

Answer: price inelastic; low

Step-by-step explanation:

An increase in wheat production lead to a substantial decline in wheat prices. Wheat is treated as a necessity good for many individuals, it does not have fairly good substitutes. Therefore, the demand for wheat is price inelastic so that even a large increase in price of wheat will lead to a small decrease in its quantity. While, demand for wheat has a low income elasticity. It means that a substantial rise in income will not lead to a large increase in the demand for wheat.