Question

According to an article in the Wall Street Journal, one of the effects of an increase in the demand for corn was a decline in the number of US farmers growing rice: "The number of acres dedicated to rice likely will decline 3% this spring compared with last year, to 2.61 million acres." Use a demand and supply graph to analyze the effect on the equilibrium price of rice resulting from the increase in the demand for corn. The shift made in the diagram reflects the effect of

Answer 1

The increase in demand for corn leads to a decline in the supply of rice, resulting in a higher equilibrium price for rice.

Step-by-step explanation:

To analyze the effect on the equilibrium price of rice resulting from the increase in the demand for corn, we need to use a demand and supply graph. As the demand for corn increases, the price of corn will increase, leading farmers to switch from growing rice to growing corn, resulting in a decline in the supply of rice. This decrease in supply will shift the supply curve for rice to the left, leading to a higher equilibrium price for rice.