Interesting how real life can imitate economics. You know how corn prices have been soaring? Well, farmers responded just like they read an econ textbook. They increased supply. One tradeoff? A smaller soybean crop.
Here are the headlines. You can see the perspective from Iowa in the Des Moines Register.
Des Moines Register: “Corn Plunges on Shocking USDA Report“
WSJ: “A Corn Crop Bonanza“
The Economic Lesson
On a demand and supply graph, demand slopes downward and supply slopes upward while price is our y-axis and quantity, the x-axis. Because farmers expected higher prices for corn, they switched from soybeans and wheat. As a result, the corn crop is bigger while the soybean and wheat harvests will diminish. On our graph, price falls because the corn supply curve shifts to the right.
An Economic Question: How would you draw the demand and supply graph for soybeans?