Consumers eating higher food costs The price of milk rose about 21% from July 2006 to July 2007, while the price of frozen orange juice increased 31%. At the same time, with higher gasoline prices, the demand for ethanol increased. Because ethanol is made from corn, the price of corn rose, which in turn increased the price of bread, chicken, cheese, and the fast-foods that use cheese. As people in China and India become richer, they are eating more beef and chicken and less rice and tofu-another source of higher food prices in the United States. Source: USA TODAY, September 6, 2007 Draw a curve to show the effect of the higher price of corn on the market for milk. Label it. Draw a point at the new equilibrium price and equilibrium quantity. 4.00 3.50 3.00 2.50 2.00- 1.50 1.00- Price (dollars per gallon) 2.50 100 S D 140 110 120 130 140 150 160 170 Milk (thousands of gallons per day) 180

Consumers eating higher food costs The price of milk rose about 21% from July 2006 to July 2007, while the price of frozen orange juice increased 31%. At the same time, with higher gasoline prices, the demand for ethanol increased. Because ethanol is made from corn, the price of corn rose, which in turn increased the price of bread, chicken, cheese, and the fast-foods that use cheese. As people in China and India become richer, they are eating more beef and chicken and less rice and tofu-another source of higher food prices in the United States. Source: USA TODAY, September 6, 2007 Draw a curve to show the effect of the higher price of corn on the market for milk. Label it. Draw a point at the new equilibrium price and equilibrium quantity. 4.00 3.50 3.00 2.50 2.00- 1.50 1.00- Price (dollars per gallon) 2.50 100 S D 140 110 120 130 140 150 160 170 Milk (thousands of gallons per day) 180

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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