1. It is obvious that negative outcomes can occur with high prices. Can high prices ever lead to positive outcomes? Explain. Economic theory tells us that when demand for a commodity increases, its price goes up, and people try to find substitutes that are cheaper. For example, when the price of oil is high, companies use com to make ethanol to add to gasoline, and palm oil is used to make diesel fuel (called biodiesel). But, as more producers start using com or palm oil, the demand for those commodities goes up and so does their price.

During 2006, for example, the price of palm oil rose from less than US$400 per metric tonne to more than US$500 per metric tonne.

When prices of commodities rise rapidly, there are usually some unanticipated outcomes. One of these is increased criminal activity. As the price of stainless steel and aluminum rose during the last few years, thieves began stealing items such as beer kegs, railway baggage carts, railroad tracks, light poles, and highway guardrails. These items were then sold to scrap yards for cash.