Price Elasticity of Demand

Running head : PRICE ELASTICITY OF DEMAND

Price Elasticity of Demand

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Price Elasticity of Demand

Price elasticity of demand is the degree of responsiveness of the quantity demanded of a good or service to changes in its price (Organisation for Economic Co-operation and Development , 2008 . With the realization of corn to be an alternative as the energy source , its demand will rise significantly . With the rise in demand , the price of the corn will also increase depending on the number of producers producing the corn . If the

producers of corn are many , the price may not increase that much , but if the producers are very few , the price of corn might increase to high levels . Since soybeans forms an immediate substitute of corn , and demand for corn has increased , the demand for soybean will drop significantly . Most farmers would want to have a share of the market demand and thus they will stop growing soybeans and start growing corn

With an increased of demand for corn , the price of corn will also increase . However this will depend on the number of suppliers of corn If they are many suppliers of corn , then the price of corn will also decrease . In situations where the producers are few , then the price will increase as the supply for the commodity will be limited (Organisation for Economic Co-operation and Development , 2008 . On the other hand since the consumers for soybeans will have reduced , the price of soybeans will decrease significantly

An increase...