1.The increase in demand for corns means the demand will shift to the right, the price of corn will increase in the corn market. This will then cause the demand for soybean to shift to the right, and demand for soybean will increase.
2. The price of corn oil will increase,because corn is a major input to produce corn oil.
3. The 1% increase in the price of corn oil, will reduce the quantity demanded for corn oil = 1% x elasticity. In the case of elastic(>1), the quantity demanded will decrease more than 1%. On the contrary,in the case of inelastic(<1),the quantity demanded will decrease less than 1%.In the case of unit(=1), the quantity demanded for corn oil will decrease 1%.In the case of unit elasticity(=1), the revenue of the corn oil sellers will be maximized.
· 8 years ago