Although this example may at first seem only hypothetical, in fact it helps to
explain a major change in the U.S. economy over the past century. Two hundred
years ago, most Americans lived on farms. Knowledge about farm methods was
sufficiently primitive that most of us had to be farmers in order to produce enough
food. Yet, over time, advances in farm technology increased the amount of food
that each farmer could produce. This increase in food supply, together with inelastic
food demand, caused farm revenues to fall, which in turn encouraged people
to leave farming.
Although this example may at first seem only hypothetical, in fact it helps toexplain a major change in the U.S. economy over the past century. Two hundredyears ago, most Americans lived on farms. Knowledge about farm methods wassufficiently primitive that most of us had to be farmers in order to produce enoughfood. Yet, over time, advances in farm technology increased the amount of foodthat each farmer could produce. This increase in food supply, together with inelasticfood demand, caused farm revenues to fall, which in turn encouraged peopleto leave farming.
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