Price Elasticity of Demand

Price Elasticity of Demand

When services and goods are demanded the supply for them increases.   Let’s say that the demand for corn has increased due to its use as an alternative energy source.   So more people are now requesting corn more than usual for its unique ability to produce energy.   So the producers of corn will now have to meet the demands for the product by producing more.   When this happens the production of corn’s substitute, soybean, will start to diminish.   The production of soybean starts to diminish because farmers will use their land to make more corn to gain a better profit, rather than using soybean and only making a quarter of the profit.   When corn is demanded the price will increase, the suppliers of corn will want to make some type of profit off of this demand so they will produce more corn.   As explained within the law of supply; as the price of a good increase, suppliers will attempt to maximize profits by increasing the quantity of the product sold (“Law of Supply”).
If suppliers are producing corn for the production of energy that can only indicate the production of other corn products, such as corn oil, will decrease.   When the production of other corn products decreases the price for these products will increase.   Take for instance if the demand for corn oil stays the same; but there was a major breakthrough in the production of corn for energy.   So now suppliers are going to stop producing corn for corn oil and start the production of corn for energy.   Because the demand for the corn oil stays the same, but the supply for it has stopped, that means that suppliers will then need to raise the price for corn products to keep them on the self longer.   As talked about earlier with the law of supply, you can see the effect one product can make many.
We are all aware that when prices begin to go up, we tend to stop looking at that product and start to look for a cheaper alternative.   Corn oil has many alternatives.   So naturally when...