Economics 9708 · AS & A Level · Income elasticity of demand

Income elasticity of demand — practice question

In the diagram, D represents the demand curve for an agricultural commodity, while S shows the original supply curve. The government undertakes to keep farmers’ incomes at no less than their starting level. The harvests in the four years that follow are indicated by supply curves S1–S4. For which of these years will the government be able to avoid paying farmers any additional income?

  • A1 and 2
  • B1 and 4
  • C2 and 3
  • D3 and 4

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