Consider the following information;

The average price of milk is up about 21 % in the last year... A variety of factors are contributing to the higher prices for bread, cereal, cheese and other shopping cart basics. Meanwhile demand for ethanol is raising the price of corn. That boosts prices for milk... because corn is used for feed.

USA Today, September 6, 2007

a. Using a diagram explain why an increase in the price of corn leads to an increase in the price of milk.

b. Suppose that while the price of milk was increasing, the wages of workers in factories that produce cookies

also was increasing. With the use of a diagram, explain the impact of these two events upon the demand

for cookies.