Price Elasticity of Demand Essay Example | Topics and Well Written Essays - 500 words - 1

Price Elasticity of Demand - Essay Example Consequently there would be a decrease in demand for soybean, thereby a reduction in the demand for soybean. As soybean is a substitute for corns, people would prefer the corns over the soybeans because of its use as an alternative energy source. In respect of the facts at hand when the farmers would look at the fact that there is an increased demand for corn by way of the demand curve shifting to the right and the fact that there has been a market in equilibrium because of the fact that there has been an increase in demand thereby the quantity demanded is more than then the quantity supplied and therefore there is a disparity between the two. Furthermore due to the fact that the ram material being used is the same it would not take much time to switch to produce corns instead of soybeans. Therefore the incentive of the increased price would allow certain producers to switch to produce corns thereby increasing the quantity supplied meeting the level where the quantity demanded is equ al to the quantity supplied thereby reaching new market equilibrium. The price of corn oil because of the increase in demand and the fact there has been a shortage in the quantity that is being supplied thereby creating disparity between the quantity demanded and the quantity supplied.