Example and Opinion of Economiics

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  • Topic: Supply and demand, Price elasticity of demand, Elasticity
  • Pages : 2 (653 words )
  • Download(s) : 1419
  • Published : February 22, 2011
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A Example and Opinion of Economiics

What happens when you have a good or service and due to unforeseen circumstances the demand increases? What happens if the price increases? How does this change affect your goods and or services? The Price of Elasticity of Demand can help determine each of these situations and calculate whether the price should be raised or dropped due to cost and demand of a product. Explanation is key; we will use these examples and explain how Price of Elasticity of Demand is used: If the demand for corn increases due to its use as an alternative energy source, what will happen to the supply of corn's substitute such as soybean? What will happen to the price of corn oil? How does the price elasticity of demand for corn oil influence the quantity-demanded of corn oil and the Total Revenue earned by sellers of corn oil? Explain, using economic terms, why this is so?

If the demand for corn increases due to its use as an alternative energy source, what will happen to the supply of corn's substitute such as soybean? There are many aspects to look at when answering this question. According to the following article “Corn and Soybean Supply and Demand and Harvest Progress Update” (Walters, 2009) corn is producing more than 13 billion bushels, which is about 8 percent more than in 2008-2009 crops. Soybeans on the other hand produced a record of 3.25 billion bushels which is 10 percent more that in 2008-2009 crop. Looking at these numbers corn is produced 3 times more than soybean. The demand of corn has increased due to the use as a alternative energy source, so the soybean price will have to go up due to the fact there is so little of the product to begin with along with being a substitute to corn the soybean market has to make up the difference. Now because of the increased demand in corn production and need you might say that farmers will produce more corn than soybeans. Not necessarily, you would have to calculate the price...
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