Question

Consider the market for corn. Indicate whether each of the following events will cause a shift in the supply curve or a movement along the curve. If it will cause a shift, specify the direction. （why？？）

The government announces a new subsidy for biofuels made from corn: Movement along the supply curve

A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre: Rightward shift of supply

An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef: Movement along the supply curve

Answer 1

Case1) The government announces a new subsidy for biofuels made from corn. this will cause a movement along the supply curve because this change will not affect the quantity supplied directly or indirectly but it will increase the quantity demanded of the corn for the production of subsidized biofuel that’s why it will cause the movement along the supply curve.

Case2) A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre this will cause the rightward shift in supply curve because the quantity supplied of the corn has increased at same price due to favorable changes in non-price factor of production of the corn.

Case3) An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef similar to case 1 this will cause a movement along the supply curve because this change will not affect the quantity supplied directly or indirectly but it will increase the quantity demanded of the corn for the consumption of cows that’s why it will cause the movement along the supply curve.

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