Question

Which of the following best describes the main problem faced by farms in the long run?

	1.	Lagging technology has decreased the productivity of farmers and therefore resulted in low farm prices and incomes.
	2.	The highly inelastic nature of agricultural demand has caused small year-to-year fluctuations in farm output to result in highly unstable farm incomes.
	3.	The supply of farm products has increased relative to the demand for them, and, because demand is inelastic, farm prices and incomes have therefore declined.
	4.	The demand for farm products has increased relative to their supply, but the highly elastic nature of agricultural demand has caused these shifts to result in declining farm incomes.

Over the past several decades, farm employment has:

	1.	grown absolutely, but declined as a percentage of total employment.
	2.	declined both absolutely and as a percentage of total employment.
	3.	increased both absolutely and as a percentage of total employment.
	4.	declined absolutely, but increased as a percentage of total employment.

Answer 1

1. Option 3.

• The agricultural farms in long run faced the problem of demand shortage as supply of farm products exceeded the demand for those products.
• In the long run period, the demand was inelastic and did not undergo much changes even when the price changed.
• This led to the decline of farm price's and incomes.

2. Option 2.

• Farm employment had been gradually decreasing from the past few decades.
• This is because more and more people are moving out of the agricultural sector into service sector due to lack of opportunities and income.
• Hence, farm employment has declined both absolutely and as a percentage of total employment.