Question

Corn syrup and maple syrup are substitutes. News of health benefits from maple has increased the demand for maple syrup and decreased the demand for corn syrup. Meanwhile, the government has subsidized corn crops, a key ingredient of corn syrup. As a result, the equilibrium price of corn syrup _______ and the equilibrium quantity ________.

Answer 1

Answer:

The equilibrium price of corn syrup will fall. The change in equilibrium quantity will depend upon the extent of change in demand and supply.

Explanation:

Corn syrup and maple syrup are substitutes.

News of health benefits from maple has increased the demand for maple syrup and decreased the demand for corn syrup.

The demand curve for corn syrup will move to the left.

Meanwhile, the government has subsidized corn crops. This will cause the price of corn to fall. As the input price declines the cost of producing corn syrup will decline as well. The firms will be able to provide more at the same cost.

This will cause the supply to increase. As the supply curve moves to the right. The equilibrium price of corn syrup will fall. The change in equilibrium quantity will depend upon the extent of change in demand and supply.