1. (10 points) Ethanol is a fuel that is produced from corn. Ethanol can be used as a fuel in certain types of cars and some varieties of gasoline have ethanol blended in them. Producing corn for ethanol has become very popular over the last 20 years since it is very profitable. In many parts of the country there are government mandates for blending ethanol into the gasoline that is sold by gas stations. This has led to an increased production of ethanol and therefore the use of corn to produce ethanol. Ethanol producers are willing to pay higher prices for corn than consumers of corn for food. If corn is used for producing ethanol, it cannot be used as food.

What impact has this had on the supply of corn for the food industry and the price of corn for food? Please explain and show the changes on a demand-supply graph for the corn for food industry. Your graph must show any shift of the curves that occurs and explain why that shift occurred.