What will happen to the supply or the demand curve for corn if the following (A

Question

What will happen to the supply or the demand curve for corn if the following (A through E) occurs? State whether there will be shift to the right or left of either the supply curve or the demand curve or a movement along the demand curve. Only one shift of the supply or demand curve can occur: do not shift both. Think about which curve is affected first.

a. corn prices are expected to rise next month

b. farm workers win higher hourly wages from management

c. storms ruin crops in the U.S.

d. CNN reports that eating corn daily is very good for your health

e. the price of soybeans (a corn substitute) has risen in the last three years and will continue to rise in the future

Explanation / Answer

a. supply wil shift to the left

sellers will decrease the supply in order to sell them next month at higher price.

b. supply will shift to the left

increase in wages increases the cost of production which reduces the supply.

c. supply will shift to the left

destruction of crops which are inputs in the production leads to decrease in supply

d. demand will shift to the right

when people become aware of the health benefits of corn, they demand more of it.

e. demand will shift to the right

increase in price of substitutes increases the demand for the good.

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