What are the ideas to solve these kind of questions? The Ministry of Agriculture

Question

What are the ideas to solve these kind of questions?

The Ministry of Agriculture finds that there is positive relationship between the inflation-adjusted price of wheat and quantity consumed of wheat over the past decade. This correlation might be a. Due to an increase in the income of consumers over time b. Due to an increase in the cost of producing wheat over time c. Due to an increase in the demand for gluten-free food (wheat contains gluten) d Due to an improvement in wheat farming technology

Explanation / Answer

a) A positive relation means the price of the wheat and the demand are both increasing together. This can be due to an increase in the income of the consumer over time. At a higher income, the demand for the goods will shift to the right i.e. at a higher price and higher demand.

The answer is "A".

b) If the demand for the worker is inelastic i.e. with an increase in the wage the demand for the labor doesn't change much then it wage rise will be beneficial or else some labors will be fired to maintain the cost.

The answer is "B". Demand for labor is not responsive to a change in wage. (no matter how much the wage increase the demand remain the same.)

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