Question

1. One year a farmer grows corn on his 200 acres of land, he sells his corn in September for $3.00 per bushel. Early the next spring he notices that the price of soybeans has gone up 50 percent while the price of corn has remained the same. What might happen to his supply curve for corn? Explain your answer.

Answer 1

Answer:

In this case,an increase in the price of soybeans by 50% while price of corn remaining constant would cause a leftward or upward shift of his supply curve for corn.

Explanation:

• Price of any product or good usually has a positive or direct relationship with its market supply as the higher price of any product or good can attract higher prospective revenue for any seller or producer of the concerned product or good.
• Hence, as the product or good price goes up, its market supply by the sellers or producers will also consequently increase.
• Now,in this instance, as the price of the soybean increases by 50%,considering the price of corn to be unchanged, the seller or the farmer in this case will produce more soybean and increase soybean supply in the market attracted by the prospect of getting higher revenue from producing and selling soybeans.
• Therefore,if soybeans production becomes more profitable due to higher market price, the farmer will shift to soybean production from corn cultivation and his supply of corn will fall and soybean will increase.This would cause a leftward or upward shift of his supply curve of corn,considering the price of corn and all other relevant market conditions as unchanged or constant.