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The Impact of Bio-Fuel Production on Food Price in the Unites States

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The Impact of Bio-Fuel Production on Food Price in the Unites States
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The Impact of Bio-fuel Production on Food Price in the Unites States
-- Analysis based on an empirical model

With the raising concern about the food price in the United States, more and more people started to study at the production of biofuel, which is made up by food. Our study aims to test the relationship and significance of increasing biofuel production on food price.
We made a hypothesis that the increasing biofuels production is the primary and direct reason for food price inflation in the U.S. Then, based on effective data collected, we tested our hypothesis by running a simple regression analysis.
In microeconomics, the best way to solve the price problem in an open market is to study the demand and supply. As show in table 1, we listed the probable factors that may influence the demand and supply of food price and tested their correlation with data range from 1980 to 2010 in the U.S.

Table.1-List of variables Predictor | Observations | Source | Food Price (P) | 31 | US Census Bureau | Households Income (I) | 31 | US Census Bureau | Biofuel production (Qb) | 31 | Earth Policy Institution on-line | Trade Weighted U.S. Dollar Index (E) | 31 | FRED | Economics growth of China (G) | 31 | IMF | Crude Oil Price (Po) | 31 | US Census Bureau | Wage (W) | 31 | US Census Bureau | We ran a regression analysis twice to determine the relation of each factor to the food price. First, we take all the variables into account and get a rough result. Then, we adjusted the model by dropping off several variables that failed in the first regression and rebuild our formula. The whole calculation is shown in the Appendix.
Conclusion
In our research and analysis, the statistic result identifies our previous hypothesis that the relation between biofuel production and food price in the U.S is significantly positive. In other word, as the U.S government has an increasing demand of those raw materials that are used to produce

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