Question

a. If the prices paid by farmers increase and the prices received by farmers decrease, then...

a. If the prices paid by farmers increase and the prices received by farmers decrease, then the parity ratio

will necessarily increase.
will be unaffected.
will necessarily decrease.
may either increase or decrease.

b. Suppose that in year A the parity ratio stood at 0.60. This means that prices

received in the base period could buy 60 percent as much as prices received in year A.
received in year A have risen by 60 percent over the prices received in the base period.
paid by farmers in year A have risen by 60 percent over the prices paid in the base period.
received in year A could buy 60 percent as much as prices received in the base period.

c. Now suppose that the parity ratio initially stood at 0.40. After several years, the prices received by farmers tripled while the prices they paid doubled. This will bring the parity ratio to

0.60.
0.44.
0.68.
0.52.

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Answer #1

Answer 1: If the price paid by farmers increases and price received by farmers decreases than parity ratio will be necessarily decreased. It shows the relative price relationship.

Parity ratio= price received to farmer/ price paid by farmer.

Answer2 : This means that price received by the farmers in the base period could buy 60percent as much as price received in year A.

Answer 3: when price received by farmer is tripled where as price given to the farmers doubled than new parity ratio is 0.60

New parity ratio = 3*x*40/100*×*2 =0.6

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