ECO100Y1 Lecture : Q1 Expensive Corn (Hard)
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Farmers can use their land to grow corn or cotton. Because of the increased demand for moisture- wicking sportswear, the demand for cotton has decreased. What are the general equilibrium effects in the market for corn and the market for cotton? |
The price of cotton will rise from the decrease in demand, causing farmers to plant more cotton and less corn. The decrease in the supply of corn will push up corn prices. | |
The price of cotton will fall from the decrease in demand, causing farmers to plant less cotton. The decrease in the supply of cotton will raise cotton prices and cause the demand for corn to rise. | |
The price of cotton will fall from the decrease in demand, causing farmers to plant less corn. The decrease in the supply of corn will raise corn prices and cause the demand for cotton to fall. | |
The price of cotton will fall from the decrease in demand, causing farmers to plant less cotton and more corn. The increase in the supply of corn will push down corn prices. |