Question

The demand for corn is made up of three broad groups:

• From food processors for use in making foods such as breakfast cereals
• From processors who turn corn into a vital ingredient for making biofuels. Biofuels can be mixed in with petroleum products to make a product similar to gasoline
• From cattle farms who use corn as a way to feed their cattle.

In addition, assume:

• NO ONE EATS CORN. It is an input into the three product groups above.
• Corn-based foods biofuels and beef are all normal goods.

Show an analysis of:

• What was happening to the corn price and why.
• What was probably happening to quantity of corn consumed and why

Use supply and demand diagrams, explain movements shown in those diagrams when you illustrate a particular event.

Scenario: The media, have seen several years of rising populations around the world and rising incomes. Seeing these trends, the media have begun to write articles that have stoked fears of a “world food crisis,” among readers similar to the one that happened in 2007 and 2008. The idea that there might be food shortages in the future is gaining credibility

Answer 1

Answer:

Given

The demand for corn is made up of three broad groups:

• From food processors for use in making foods such as breakfast cereals
• From processors who turn corn into a vital ingredient for making biofuels. Biofuels can be mixed in with petroleum products to make a product similar to gasoline
• From cattle farms who use corn as a way to feed their cattle.

“world food crisis,” and the idea that there might be food shortages in the future is gaining credibility is explained below: