On August 10, 2020, a major storm known as a derecho, hit the Midwest US (especially in Iowa, Illinois and Indiana) with straight line winds of up to 100 miles per hour. It flattened the corn crop on millions of acres. This is clearly a natural production event that caused growing conditions to change from normal to below-normal. Also in August 2020, it became clear that the Peoples Republic of China (PRC) had returned as a major customer of US corn. For political reasons, the PRC had not been purchasing US food products. However, the PRC’s own domestic sources of grain were not able to meet growing demands for corn. As a result, the 2020 US corn market was changed by the addition of the PRC as a major buying customer. · Use a standard supply and demand analysis to predict the combined effects of these two events on the US Corn Market. o What is the direction of change for the US Corn Supply curve? Why? What is the independent impact of this supply-side event on the equilibrium price and equilibrium quantity of corn? o What is the direction of change for the US Corn Demand curve? Why? What is the independent impact of this demand-side event on the equilibrium price and equilibrium quantity of corn? o When we account for the effects of the both the supply and demand changes, what are the predicted net effects on the equilibrium price and quantity in the corn market (increase, decrease or indeterminate), and why? Explain your logic completely.
On August 10, 2020, a major storm known as a derecho, hit the Midwest US (especially in Iowa,
Illinois and Indiana) with straight line winds of up to 100 miles per hour. It flattened the corn
crop on millions of acres. This is clearly a natural production event that caused growing
conditions to change from normal to below-normal.
Also in August 2020, it became clear that the Peoples Republic of China (PRC) had returned as a
major customer of US corn. For political reasons, the PRC had not been purchasing US food
products.
However, the PRC’s own domestic sources of grain were not able to meet growing demands for
corn. As a result, the 2020 US corn market was changed by the addition of the PRC as a major
buying customer.
· Use a standard
events on the US Corn Market.
o What is the direction of change for the US Corn Supply curve? Why? What is the
independent impact of this supply-side event on the
quantity of corn?
o What is the direction of change for the US Corn Demand curve? Why? What is the
independent impact of this demand-side event on the equilibrium price and equilibrium
quantity of corn?
o When we account for the effects of the both the supply and demand changes, what are
the predicted net effects on the equilibrium price and quantity in the corn market
(increase, decrease or indeterminate), and why? Explain your logic completely.
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