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Income Elasticity for Staple Foods

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The income elasticity for most staple foods, such as wheat, is known to be between zero and one.
a. As incomes rise over time, what will happen to the demand for wheat?
b. What will happen to the quantity of wheat purchased by consumers?
c. What will happen to the percentage of their budgets that consumers spend on wheat?
d. All other things equal, are farmers likely to be relatively better off or relatively worse off in periods of rising incomes?

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This solution provides brief explanations for the four income elasticity questions.

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The income elasticity for most staple foods, such as wheat, is known to be between zero and one.

a. As incomes rise over time, what will happen to the demand for wheat?

The demand for wheat is going to increase - but not as fast as the income ( think of it whis way, if you start to earn $100 more, you will probably ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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