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?

4 Answers

  • Anonymous
    9 years ago
    Favorite Answer

    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.

    Source(s): Anjaree
  • Anonymous
    9 years ago

    Well, the first thing that will happen is that the price of corn will go up. In the short run, at least. Over the long run, farmers will plant more corn to meet the demand.

    Since the price of corn is going up, people will look to buy substitute goods instead. The demand for soybeans will rise -- and the price will go up too.

    Corn oil will get more expensive, since corn is more expensive (and you obviously need corn to make corn oil).

    Price elasticity is important because the more elastic the demand is, the fewer people will buy corn oil when the price goes up.

  • hawk
    Lv 4
    3 years ago

    Soybeans are greater effectual than corn at producing biofuels. it is why corn gets a greater government. (taxpayer) subsidy to offer biofuels. for the reason that corn gets the bigger subsidy the farmers want to enhance corn. Whoever the moron grew to become into that concept this up ought to are transforming into to be fired extremely of maximum probable getting a develop.

  • 3 years ago

    Soybeans are extra effective than corn at producing biofuels. it is why corn gets a bigger govt. (taxpayer) subsidy to supply biofuels. by way of fact corn gets the better subsidy the farmers prefer to develop corn. Whoever the moron grow to be that theory this up would desire to are growing to be to be fired rather of maximum possibly getting a develop.

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