Assume that many farmers choose between planting either peanuts or corn. Suppose that the government decides to offer farmers a subsidy of $10 a bushel to plant corn since it was discovered that ethanol made from corn can be used as an alternative fuel source. Show the effect of this subsidy by shifting the appropriate curves in the graphs below. Price of peanuts per bushel ($) Supply Demand Quantity of peanuts (bushels) Price of corn per bushel ($) Demand Quantity of corn (bushels) Supply

Assume that many farmers choose between planting either peanuts or corn. Suppose that the government decides to offer farmers a subsidy of $10 a bushel to plant corn since it was discovered that ethanol made from corn can be used as an alternative fuel source. Show the effect of this subsidy by shifting the appropriate curves in the graphs below. Price of peanuts per bushel ($) Supply Demand Quantity of peanuts (bushels) Price of corn per bushel ($) Demand Quantity of corn (bushels) Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Assume that many farmers choose between planting either peanuts or corn. Suppose that the government decides to
offer farmers a subsidy of $10 a bushel to plant corn since it was discovered that ethanol made from corn can be
used as an alternative fuel source. Show the effect of this subsidy by shifting the appropriate curves in the graphs
below.
Price of peanuts per bushel ($)
Supply
Demand
Quantity of peanuts (bushels)
This change occured as a result of a change in:
Price of corn per bushel ($)
Demand
Supply
Quantity of corn (bushels)
entry and exit of other peanut farmers.
subsidies on peanuts.
a change in an opportunity cost.
speculation that the price of peanuts will change.

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