Problem 1: Some states are requiring that ethanol be mixed with gasoline to comply with anti-pollution laws. Ethanol can be made from corn. What effect are these policies having on the equilibrium price and quantity of corn?
Problem 2: Corn is a key input in the poultry, dairy, hog, and cattle industry. What effect has the sharp increase in the price of corn had on these industries?
Please use supply/demand graphs to analyze shifts in supply and demand and the resulting changes in market equilibrium in the situations described in Questions 1 and 2. Show the shifts of either demand or supply curves.
Illustrate graphically how the event described in Problem 1 affects the equilibrium price and quantity of corn.
Illustrate graphically how the event described in Problem 2 affects the industries.