Imagine a simplified world economy where there is a global market for corn. For producers in different parts of the world, the costs of transporting corn to the locations where corn is demanded are minimal in relation to the price of corn. Dr The demand for com is made up of three broad groups: From food processors for use in making foods such as breakfast cereals From processors who turn corn into a vital ingredient for making blofuels. Biofuels can be mixed in with petroleum products to make a product similar to gasoline From cattle (beef) farms who use corn as a way to feed their cattle In addition, assume: NO ONE EATS CORN. It is an input into the three product groups above. Corn-based foods like breakfast cereals, biofuels and beef are all normal goods, For each of the first six questions you will be given a scenario, For each one of these six situations in turn, in other words when you have analyzed event #1, move on to event #2 AS THOUGH EVENT 1 HAD NOT HAPPENED. Show an analysis of: What was happening to the corn price and why What was probably happening to quantity of corn consumed and why Use supply and demand diagrams, explain movements shown in those diagrams when you illustrate a particular event You know what the format of that diagram should look like. Make sure your diagrams are in this form: P Ceteris Paribus Violation - Chicken Disease P: Pop short Q 1. Very favorable weather in the US Midwest, one of the world's major corn producers, improved growing conditions for all midwest corn producers. Edit View Insert Format Tools Table 12ptParagraph ev 2. There was continuing growth in the populations of the vast countries of India and China (their combined populations are over 2.4 billion people) and growth in the incomes of people in those countries. Note: you can assume that there is demand for beef in India. Although a complex issue, according to the BBC, quoting survey data, there is significant beef demand. Source: BBC: "The myth of the Indian vegetarian nation." Edit View Insert Format Tools Table 12ptv Paragraph B IVA & Tev 3. Further understanding of/attitudes to the causes of global warming is causing young people in particular to drive less and migrate to denser cities with more public transport Edit View Insert Format Tools Table 12pt Paragraph 2 : 4. Because of fears of future oil shortages and environmental concerns, governments around the world have promoted the use of biofuels as a partial substitute for gasoline through producer subsidies. This is a complex issue. For this case, assume the subsidy is a fixed amount per unit of output. When you provide your analysis in addition to the market analysis, comment on and analyze the economic efficiency of the subsidy, including the term "deadweight loss" in your response and in diagram form. Hint: A diagram like this might be helpful S S1 B D H EG D
