Question

Elasticity along the​ world's demand curve for wheat

A.

will always be

inelasticinelastic.

B.

will be constant.

C.

will decrease with price.

D.

will increase with price.

E.

will always be

infinitely elastic.

Answer 1

Elasticity along the world's demand curve for wheat will always be inelastic. Wheat is an agricultural product. It is used to make pasta, bread, etc. It is a necessity product and therefore a change in price of wheat will not affect its consumption much. Thus the proportionate change in the demand of wheat will be smaller as compared to the proportionate change in price of wheat.

Hence the correct option is A.

Wheat is an agricultural commodity that is needed to produce products like bread and pastas therefore it is normal commodity and in this case consumer responsiveness to change in price is small therefore wheat is income inelastic. As wheat farmers produce more there will create a competitive market which gives us a new lower price and a new market equilibrium point E1.The supply of wheat is elastic which means a small change in price will result in a large change in quantity demanded.