Question

Which of the following correctly explain demand-side reasons for sectoral shifts in the economy?

1. Income elasticity of demand for food is high, so demand for agricultural goods rises faster than income.

2. Demand for industrial goods and services rises sharply with higher incomes.

3. Even as incomes rise, food demand increases only marginally.

• A. 1 and 2 only
• B. 2 and 3 only
• C. 1 and 3 only
• D. 1, 2 and 3

Answer 1

Answer:

B. 2 and 3 only

• Elasticity of demand for food is low, not high ⇒ statement 1 is incorrect.

• Industrial and service demand rise faster with income ⇒ 2 and 3 are correct.