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25 September, 13:26

The market for corn is initially in equilibrium. Suppose that the production of biofuels, which use corn as an input, increase, and at the same time, increases in the price of oil cause farm production costs to rise. Explain the effect on equilibrium price and quantity in the corn market.

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  1. 25 September, 13:49
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    The price of corn increases, but the effect on the amount of equilibrium cannot be determined without further information.

    Explanation:

    Due to the increase in both the biofuel that is produced from corn and the costs of field production of corn oil, it is obvious that an increase in demand also increases corn grain.

    However, in order to quantify the imbalance that was generated from these new demands and offers, more quantification information is needed, so it is obvious that an imbalance was generated but with the exposed data it cannot be quantified.
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