This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Its in the best interest of these companies to limit the supply of tortillas and keep the price relatively high. Tortillas are an elastic good, meaning that a change in price will cause a large change in quantity supplied. Furthermore, even if the firm would lower the prices by a small amount, their total revenue will increase. A company like Gruma S.A. has an incentive to keep prices up as an attempt to keep total revenue up while keeping costs at a manageable level. Figure 1 illustrates how tortillas are an elastic good on a market diagram. Figure 2 is a production possibilities curve comparing the production of tortillas and ethanol. The combined output has shifted down the curve toward ethanol to account for an increased demand for ethanol production from corn. Kocher 2...
View Full Document
This note was uploaded on 04/12/2008 for the course ECO 112 taught by Professor Tolin during the Fall '08 term at West Chester.
- Fall '08