📚 Learning Guide
Market Dynamics in Agriculture
hard

How do trade policies impact the price elasticity of demand for agricultural products, considering varying consumer preferences?

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Choose the Best Answer

A

Trade policies have no effect on price elasticity

B

Trade policies can influence consumer preferences, which in turn affects price elasticity

C

Price elasticity is solely determined by consumer income

D

Trade policies only impact supply, not demand

Understanding the Answer

Let's break down why this is correct

Answer

Trade policies can significantly affect the price elasticity of demand for agricultural products by influencing how available and affordable these products are in different markets. When a country imposes tariffs or quotas on agricultural imports, it can make foreign products more expensive or less available, leading consumers to rely more on domestic products. If consumers have strong preferences for local produce, the demand for those products may become less elastic, meaning that even if prices increase, consumers will still buy them. For example, if a country raises tariffs on imported oranges, local oranges might become more popular, and consumers may continue purchasing them despite price increases. In contrast, if a trade policy makes imported oranges cheaper and more accessible, the demand for local oranges could become more elastic, as consumers might switch to the cheaper option.

Detailed Explanation

Trade policies can change what products are available and how much they cost. Other options are incorrect because Some might think trade policies don't matter for demand; It's a common mistake to think only income affects demand.

Key Concepts

price elasticity
consumer preferences
trade policies
Topic

Market Dynamics in Agriculture

Difficulty

hard level question

Cognitive Level

understand

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