Explain the impact of higher corn prices on consumers.Draw a graph explaining the impact of higher corn prices on consumers. Explain which curve will shift on your graph and the change in price and quantity demanded.Explain the impact of higher corn prices on producers.Draw a graph explaining the impact of higher corn prices on producers. Explain which curve will shift on your graph and the change in price and quantity supplied. Consumer effectBut there is considerable debate about how much consumers will see these higher pricesshow up in their grocery carts. Some analysts, such as Ken Mayland, president ofClear View Economics in Pepper Pike, Ohio, say food prices are likely to increase enoughto spark inflationary concerns."It will likely mean higher prices for com-based products, which is practicallyeverything," says Richard Asplund, research director at Melvin Securities in Chicago.In Mexico, higher corn prices are being blamed for skyrocketing tortilla prices, whichhave increased the country's inflation rate. Last week, the Mexican government struck adeal with producers and grocery stores to cap tortilla prices.But American Farm Bureau Federation senior economist Terry Francl says U.S.consumers will see very little impact from higher corn prices. He expects the index forfood inflation at the consumer level will not be affected by ethanol production in 2007and then will rise 0.2% in 2008 and 0.5% in 2009 because of ethanol production."It's probably not going to be all that much," he says, noting more than half of corn isused to feed animals. But it takes time before higher feeding costs affect retail meatprices. And meat prices are likely to rise at a much slower pace than the increase in feed "It will likely mean higher prices for com-based products, which is practicallyeverything," says Richard Asplund, research director at Melvin Securities in Chicago.In Mexico, higher com prices are being blamed for skyrocketing tortilla prices, whichhave increased the country's inflation rate. Last week, the Mexican government struck adeal with producers and grocery stores to cap tortilla prices.But American Farm Bureau Federation senior economist Terry Francl says U.S.consumers will see very little impact from higher com prices. He expects the index forfood inflation at the consumer level will not be affected by ethanol production in 2007and then will rise 0.2% in 2008 and 0.5% in 2009 because of ethanol production."It's probably not going to be all that much," he says, noting more than half of corn isused to feed animals. But it takes time before higher feeding costs affect retail meatprices. And meat prices are likely to rise at a much slower pace than the increase in feedcosts, he says.Says Michael Swanson, agricultural economist at Wells Fargo in Minneapolis, "We won'tsee any impact unless corn prices stay high through all of 2007." If that happens,"Eventually, it is really going to show up on the meat counter."Strong demand for corn has led to a sharpincrease in prices. Price for corn trading fordelivery in March 2007:(dollars per bushel)$4.00-$2.55$3.00-$2.00-$1.00-5/27/051/6/06$4.041/22/07

Question

Explain the impact of higher corn prices on consumers.Draw a graph explaining the impact of higher corn prices on consumers. Explain which curve will shift on your graph and the change in price and quantity demanded.Explain the impact of higher corn prices on producers.Draw a graph explaining the impact of higher corn prices on producers. Explain which curve will shift on your graph and the change in price and quantity supplied. Consumer effectBut there is considerable debate about how much consumers will see these higher pricesshow up in their grocery carts. Some analysts, such as Ken Mayland, president ofClear View Economics in Pepper Pike, Ohio, say food prices are likely to increase enoughto spark inflationary concerns.&#34;It will likely mean higher prices for com-based products, which is practicallyeverything,&#34; says Richard Asplund, research director at Melvin Securities in Chicago.In Mexico, higher corn prices are being blamed for skyrocketing tortilla prices, whichhave increased the country's inflation rate. Last week, the Mexican government struck adeal with producers and grocery stores to cap tortilla prices.But American Farm Bureau Federation senior economist Terry Francl says U.S.consumers will see very little impact from higher corn prices. He expects the index forfood inflation at the consumer level will not be affected by ethanol production in 2007and then will rise 0.2% in 2008 and 0.5% in 2009 because of ethanol production.&#34;It's probably not going to be all that much,&#34; he says, noting more than half of corn isused to feed animals. But it takes time before higher feeding costs affect retail meatprices. And meat prices are likely to rise at a much slower pace than the increase in feed &#34;It will likely mean higher prices for com-based products, which is practicallyeverything,&#34; says Richard Asplund, research director at Melvin Securities in Chicago.In Mexico, higher com prices are being blamed for skyrocketing tortilla prices, whichhave increased the country's inflation rate. Last week, the Mexican government struck adeal with producers and grocery stores to cap tortilla prices.But American Farm Bureau Federation senior economist Terry Francl says U.S.consumers will see very little impact from higher com prices. He expects the index forfood inflation at the consumer level will not be affected by ethanol production in 2007and then will rise 0.2% in 2008 and 0.5% in 2009 because of ethanol production.&#34;It's probably not going to be all that much,&#34; he says, noting more than half of corn isused to feed animals. But it takes time before higher feeding costs affect retail meatprices. And meat prices are likely to rise at a much slower pace than the increase in feedcosts, he says.Says Michael Swanson, agricultural economist at Wells Fargo in Minneapolis, &#34;We won'tsee any impact unless corn prices stay high through all of 2007.&#34; If that happens,&#34;Eventually, it is really going to show up on the meat counter.&#34;Strong demand for corn has led to a sharpincrease in prices. Price for corn trading fordelivery in March 2007:(dollars per bushel)$4.00-$2.55$3.00-$2.00-$1.00-5/27/051/6/06$4.041/22/07

Accepted Answer

Demand-supply equilibrium:
The demand function determines the willingness to pay of an individual…