Consider the market for corn say whether each ofthe...

Consider the market for corn. Say whether each of the following events will cause a shift in the supply curve or a movement along the curve. If it will cause a shift, specify the direction. [LO 3.5] a. A drought hits corn-growing regions. b. The government announces a new subsidy for biofuels made from corn. c. A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food. d. A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre. e. An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef.

Transcript

00:01 So here we're talking about the supply of corn, right? so let's draw a supply curve, which is a relationship between price and quantity that slopes up, saying that as the price rises, people are willing to grow more corn.

00:16 So if we're moving from a to b, this green movement here is a change in quantity demanded, right? people are reacting to the price.

00:26 They're moving to a different, sorry, not quantity demanded, quantity.

00:30 Supply, sorry.

00:31 They're just moving to a different point on the same curve.

00:35 A change in supply is when this entire curve moves, right? so this blue thing would be actually an increase in supply.

00:43 It means that something else that's not the price is affecting how much the quantity supplied at every single price given.

00:52 So let's go through each of these, right? so for a, a, we have a drought.

01:00 So the key thing is that this is not price, right? this is going to be a decrease in supply, right? it's a shift because at every single price, less corn will be available, right? so at every single price, less corn will be available.

01:20 The whole supply curve is shifting, right? for b, we have a subsidy for, biofuels using corn.

01:38 So what's happening to this now? note this is going to increase the demand for corn, right? so people want corn to turn into biofuel, right? you're going to get an increase in demand for corn.

02:00 This increase in the demand for corn is going to look something like this, right? you get an increase in the demand...

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