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2. This question has to do with shifting the supply curve and its effects on

equilibrium price and equilibrium quantity in the corn market. You must answer questions 2a through 2d. 

 

Scenario: Suppose that the demand curve for corn stays constant-it does not shift- and the supply curve for corn shifts. Using graphs and words for each scenario below, questions 2a through 2d please explain what happens to equilibrium price and equilibrium quantity of corn if

 

2a. the cost of diesel fuel, used in farm machinery to produce corn, falls

2b. many corn-growing farmers suffer bankruptcy

2c. the federal government implements a $1.50 tax placed on the production of corn per bushel

2d. the federal government decides to give a $25,000 subsidy to farm producers to produce corn

 

Note: For each scenario given, please label price on the y-axis and quantity on the x-axis, P1 as the initial equilibrium price, Q1 as the initial equilibrium quantity, P1 as the new equilibrium price and Q2 as the new equilibrium quantity and S1 as the initial supply curve, S2 as the new supply curve, D1 as the demand curve. Please make sure you mention that the supply curve shifts to the right or to the left from S1 to S2 and equilibrium price and equilibrium quantity rises or falls from P1 to P2 and Q1 to Q2 in your answer. 

 

 

 

 

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