The puzzle about agricultural products, for example, was that the increasing technical efficiency of farming has led to lower prices and a declining share of farming in the national production and employment. The key point here is inelastic demand.
Demand for agricultural products (industry as a whole) is inelastic. We have plenty of evidence for this. Over the years, technical progress has made the farmers more efficient, and because farming is highly competitive, prices have dropped with the costs. Each drop in farm prices brought only a small increase in the quantity of food sold -- not enough to offset the price cuts, so farm sales revenues overall have declined.
Why are the farmers "crazy" enough to cut their prices? Each individual farmer has a firm demand curve that is elastic -- since his products are very good substitutes for those of thousands of other farmers -- so each farmer gains revenue by cutting. But when they all do it at once, they all lose.
Over a hundred years, this had an enormous impact: whereas a century ago farmers were about half the population, farmers now are about 3% of the population. The other side of the coin is that, 100 years ago, non-farmers had to spend about 1/2 of their income to buy food. Today we spend only about 3% of our income to buy food (not counting processing!)
Something like this also happens in shorter periods. When the weather is good, prices of farm products decline, and farmers' sales revenue fall with them.But when the weather is terrible, and prices for farm products rise, the farmers are better off on the average.
