Question

The demand for agricultural products is

		downsloping to the individual farmer but perfectly elastic to farmers as a group.
		relatively elastic with respect to price.
		relatively elastic with respect to income.
		relatively inelastic with respect to price.

Answer 1

D. Relatively elastic with respect to the price

Reason: Agriculture sector is involved in food production, which is constituted as the basic necessity for life. As a result of which, the demand for food products and agricultural goods taken together will be relatively inelastic. The change in prices does not lead to very high variation in demand of food products, because whatever the level of prices be, a minimal quantity of food is required. So an increase in level of prices of agri products, may decrease the demand for agricultural products but the decrease in demand will be relatively lesser than the increase in price of the agri products and vice versa. Thus demand for agricultural products are thus relatively inelastic.