Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
Chapter 1 #z
Analyzing Economic Problems #z #z
Solutions to Review Questions
#z #z #z
1. What #zis #zthe #zdifference #zbetween #zmicroeconomics #zand #zmacroeconomics?
Microeconomics #zstudies #zthe #zeconomic #zbehavior #zof #zindividual #zeconomic #zdecision #zmakers,
#zsuch #zas #za #zconsumer, #za #zworker, #za #zfirm, #zor #za #zmanager. # z Macroeconomics #zstudies #zhow #zan
#zentire #znational #zeconomy #zperforms, #zexamining #zsuch #ztopics #zas #zthe #zaggregate #zlevels #zof
#zincome #zand #zemployment, #zthe #zlevels #zof #zinterest #zrates #zand #zprices, #zthe #zrate #zof #zinflation,
#zand #zthe #znature #zof #zbusiness #zcycles.
2. Why #zis #zeconomics #zoften #zdescribed #zas #zthe #zscience #zof #zconstrained #zchoice?
While #zour #zwants #zfor #zgoods #zand #zservices #zare #zunlimited, #zthe #zresources #znecessary #zto
#zproduce #zthose #zgoods #zand #zservices, #zsuch #zas #zlabor, #zmanagerial #ztalent, #zcapital, #zand #zraw
#zmaterials, #zare #z“scarce” #zbecause #ztheir #zsupply #zis #zlimited. # z This #zscarcity #zimplies #zthat #zwe
#zare #zconstrained #zin #zthe #zchoices #zwe #zcan #zmake #zabout #zwhich #zgoods #zand #zservices #zto #zproduce.
# z Thus, #zeconomics #zis #zoften #zdescribed #zas #zthe #zscience #zof #zconstrained #zchoice.
3. How #zdoes #zthe #ztool #zof #zconstrained #zoptimization #zhelp #zdecision #zmakers #zmake
#zchoices? #zWhat #zroles #zdo #zthe #zobjective #zfunction #zand #zconstraints #zplay #zin #za #zmodel #zof
#zconstrained #zoptimization?
Constrained #zoptimization #zallows #zthe #zdecision #zmaker #zto #zselect #zthe #zbest #z(optimal) #zalternative
#zwhile #zaccounting #zfor #zany #zpossible #zlimitations #zor #zrestrictions #zon #zthe #zchoices. # z The
#zobjective #zfunction #zrepresents #zthe #zrelationship #zto #zbe #zmaximized #zor #zminimized. # z For
#zexample, #za #zfirm’s #zprofit #zmight #zbe #zthe #zobjective #zfunction #zand #zall #zchoices #zwill #zbe
#zevaluated #zin #zthe #zprofit #zfunction #zto #zdetermine #zwhich #z yields #zthe #zhighest #zprofit. # z The
#zconstraints #zplace #zlimitations #zon #zthe #zchoice #zthe #zdecision #zmaker #zcan #zselect #zand #zdefines #zthe
#zset #zof #zalternatives #zfrom #zwhich #zthe #zbest #zwill #zbe #zchosen.
4. Suppose #zthe #zmarket #zfor #zwheat #zis #zcompetitive, #zwith #zan #zupward-sloping #zsupply
#zcurve, #za #zdownward-sloping #zdemand #zcurve, #zand #zan #zequilibrium #zprice #zof #z$4.00 #zper
#zbushel. #zWhy #zwould #za #zhigher #zprice #z(e.g., #z$5.00 #zper #zbushel) #znot #zbe #zan #zequilibrium
#zprice? #zWhy #zwould #za #zlower #zprice #z(e.g., #z$2.50 #zper #zbushel) #znot #zbe #zan #zequilibrium
#zprice?
If #zthe #zprice #zin #zthe #zmarket #zwas #zabove #zthe #zequilibrium #zprice, #zconsumers #zwould #zbe #zwilling
#zto #zpurchase #zfewer #zunits #zthan #zsuppliers #zwould #zbe #zwilling #zto #zsell, #zcreating #zan #zexcess
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z1
,Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
#zsupply. # z As #zsuppliers #zrealize #zthey #zare #znot #zselling #zthe #zunits #zthey #zhave #zmade #zavailable,
#zsellers #zwill #zbid #zdown #zthe
price to entice more consumers to purchase their goods or services. By definition, equilibrium is
a state that will remain unchanged as long as exogenous factors remain unchanged. Since in this
case suppliers will lower their price, this high price cannot be an equilibrium.
When the price is below the equilibrium price, consumers will demand more units than suppliers
have made available. This excess demand will entice consumers to bid up the prices to purchase
the limited units available. Since the price will change, it cannot be an equilibrium.
5. What is the difference between an exogenous variable and an endogenous variable
in an economic model? Would it ever be useful to construct a model that contained only
exogenous variables (and no endogenous variables)?
Exogenous variables are taken as given in an economic model, i.e., they are determined by some
process outside the model, while endogenous variables are determined within the economic
model being studied.
An economic model that contained no endogenous variables would not be very interesting. With
no endogenous variables, nothing would be determined by the model so it would not serve much
purpose.
6. Why do economists do comparative statics analysis? What role do endogenous
variables and exogenous variables play in comparative statics analysis?
Comparative statics analyses are performed to determine how the levels of endogenous variables
change as some exogenous variable is changed. This type of analysis is very important since in
the real world the exogenous variables, such as weather, policy tools, etc. are always changing
and it is useful to know how changes in these variables affect the levels of other, endogenous,
variables. An example of comparative statics analysis would be asking the question: If
extraordinarily low rainfall (an exogenous variable) causes a 30 percent reduction in corn supply,
by how much will the market price for corn (an endogenous variable) increase?
7. What is the difference between positive and normative analysis? Which of the
following questions would entail positive analysis, and which normative analysis?
a) What effect will Internet auction companies have on the profits of local automobile
dealerships?
b) Should the government impose special taxes on sales of merchandise made over the
Internet?
Positive analysis attempts to explain how an economic system works or to predict how it will
change over time by asking explanatory or predictive questions. Normative analysis focuses on
what should be done by asking prescriptive questions.
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z2
,Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
a) Because #zthis #zquestion #zasks #zwhether #zdealership #zprofits #zwill #zgo #zup #zor #zdown
#z(and #zby #zhow #zmuch) #z– #zbut #zrefrains #zfrom #zinquiring #zas #zto #zwhether #zthis #zwould
#zbe #za #zgood #zthing #z– #zit #zis #zan #zexample #zof #zpositive #zanalysis.
b) On #zthe #zother #zhand, #zthis #zquestion #zasks #zwhether #zit #zis #zdesirable #zto #zimpose
#ztaxes #zon #zInternet #zsales, #zso #zit #zis #znormative #zanalysis. # z Notably, #zthis
#zquestion #zdoes #znot #zask #zwhat #zthe #zeffect #zof #zsuch #ztaxes #zwould #zbe.
Solutions to Problems
#z #z
1.1 Discuss #zthe #zfollowing #zstatement: #z“Since #zsupply #zand #zdemand #zcurves #zare
#zalways #zshifting, #zmarkets #znever #zactually #zreach #zan #zequilibrium. #zTherefore, #zthe
#zconcept #zof #zequilibrium #zis #zuseless.”
While #zthe #zclaim #zthat #zmarkets #znever #zreach #zan #zequilibrium #zis #zprobably #zdebatable, #zeven #zif
#zmarkets #zdo #znot #zever #zreach #zequilibrium, #zthe #zconcept #zis #zstill #zof #zcentral #zimportance. # z The
#zconcept #zof #zequilibrium #zis #zimportant #zbecause #zit #zprovides #za #zsimple #zway #zto #zpredict #zhow
#zmarket #zprices #zand #zquantities #zwill #zchange #zas #zexogenous #zvariables #zchange. # z Thus, #zwhile
#zwe #zmay #znever #zreach #za #zparticular #zequilibrium #zprice, #zsay #zbecause #za #zsupply #zor #zdemand
#zschedule #zshifts #zas #zthe #zmarket #zmoves #ztoward #zequilibrium, #zwe #zcan #zpredict #zwith #zrelative
#zease, #zfor #zexample, #zwhether #zprices #zwill #zbe #zrising #zor #zfalling #zwhen #zexogenous #zmarket
#zfactors #zchange #zas #zwe #zmove #ztoward #zequilibrium. # z As #zexogenous #zvariables #zcontinue #zto
#zchange, #zwe #zcan #zcontinue #zto #zpredict #zthe #zdirection #zof #zchange #zfor #zthe #zendogenous
#zvariables, #zand #zthis #zis #znot #z“useless.”
1.2 In #zan #zarticle #zentitled, #z“Corn #zPrices #zSurge #zon #zExport #zDemand, #zCrop #zData,”
#zThe #zWall #zStreet #zJournal #zidentified #zseveral #zexogenous #zshocks #zthat #zpushed #zU.S. #zcorn
#zprices #zsharply #zhigher.(See #zthe #zarticle #zby #zAaron #zLucchetti, #zAugust #z22, #z1997, #zp. #zC17. #zon #znational
#zincome.) #zSuppose #zthe #zU.S. #zmarket #zfor #zcorn #zis #zcompetitive, #zwith #zan #zupward-sloping
#zsupply #zcurve #zand #za #zdownward- #zsloping #zdemand #zcurve. #zFor #zeach #zof #zthe #zfollowing
#zscenarios, #zillustrate #zgraphically #zhow #zthe #zexogenous #zevent #zdescribed #zwill #zcontribute
#zto #za #zhigher #zprice #zof #zcorn #zin #zthe #zU.S. #zmarket.
a) The #zU.S. #zDepartment #zof #zAgriculture #zannounces #zthat #zexports #zof #zcorn #zto
#zTaiwan #zand #zJapan #zwere #z“surprisingly #zbullish,” #zaround #z30 #zpercent #zhigher #zthan
#zhad #zbeen #zexpected.
b) Some #zanalysts #zproject #zthat #zthe #zsize #zof #zthe #zU.S. #zcorn #zcrop #zwill #zhit #za #zsix-year #zlow
#zbecause #zof #zdry #zweather.
c) The #zstrengthening #zof #zEl #zNiño, #zthe #zmeteorological #ztrend #zthat #zbrings #zwarmer
#zweather #zto #zthe #zwestern #zcoast #zof #zSouth #zAmerica, #zreduces #zcorn #zproduction #zoutside
#zthe #zUnited #zStates, #zthereby #zincreasing #zforeign #zcountries’ #zdependence #zon #zthe #zU.S.
#zcorn #zcrop.
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z3
, Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
a) Surprisingly #zhigh #zexport #zsales #zmean #zthat #zthe #zdemand #zfor #zcorn #zwas
#zhigher #zthan #zexpected, #zat #zD2 # z rather #zthan #zD1.
P
S
P2
# z
P1
D2
D1
Q
b) Dry #zweather #zwould #zreduce #zthe #zsupply #zof #zcorn, #zto #zS2 # z rather #zthan #zS1.
S2
P
S1
P2
P1
D
Q
c) Assuming #zthe #zU.S. #zdoes #znot #zimport #zcorn, #zreduced #zproduction #zoutside #zthe
#zU.S. #zwould #znot #zimpact #zU.S. #zcorn #zmarket #zsupply. # z El #zNino #zwould,
#zhowever, #zcause #zdemand #zfor #zU.S. #zcorn #zto #zshift #zout, #zthe #zfigure #zbeing #zthe
#zsame #zas #zin #zpart #z(a) #zabove.
1.3 In #zearly #z2008, #zthe #zprice #zof #zoil #zon #zthe #zworld #zmarket #zincreased, #zhitting #za #zpeak #zof #zabout
$140 #zper #zbarrel #zin #zJuly, #z2008. #zIn #zthe #zsecond #zhalf #zof #z2008, #zthe #zprice #zof #zoil #zdeclined,
#zending #zthe #zyear #zat #zjust #zover #z$40 #zper #zbarrel. #zSuppose #zthat #zthe #zglobal #zmarket #zfor #zoil
#zcan #zbe #zdescribed #zby #zan #zupward-sloping #zsupply #zcurve #zand #za #zdownward-sloping
#zdemand #zcurve. #zFor #zeach #zof #zthe #zfollowing #zscenarios, #zillustrate #zgraphically #zhow #zthe
#zexogenous #zevent #zcontributed #zto #za #zrise #zor #za #zdecline #zin #zthe #zprice #zof #zoil #zin #z2008:
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z4
#zedition #zManual
Chapter 1 #z
Analyzing Economic Problems #z #z
Solutions to Review Questions
#z #z #z
1. What #zis #zthe #zdifference #zbetween #zmicroeconomics #zand #zmacroeconomics?
Microeconomics #zstudies #zthe #zeconomic #zbehavior #zof #zindividual #zeconomic #zdecision #zmakers,
#zsuch #zas #za #zconsumer, #za #zworker, #za #zfirm, #zor #za #zmanager. # z Macroeconomics #zstudies #zhow #zan
#zentire #znational #zeconomy #zperforms, #zexamining #zsuch #ztopics #zas #zthe #zaggregate #zlevels #zof
#zincome #zand #zemployment, #zthe #zlevels #zof #zinterest #zrates #zand #zprices, #zthe #zrate #zof #zinflation,
#zand #zthe #znature #zof #zbusiness #zcycles.
2. Why #zis #zeconomics #zoften #zdescribed #zas #zthe #zscience #zof #zconstrained #zchoice?
While #zour #zwants #zfor #zgoods #zand #zservices #zare #zunlimited, #zthe #zresources #znecessary #zto
#zproduce #zthose #zgoods #zand #zservices, #zsuch #zas #zlabor, #zmanagerial #ztalent, #zcapital, #zand #zraw
#zmaterials, #zare #z“scarce” #zbecause #ztheir #zsupply #zis #zlimited. # z This #zscarcity #zimplies #zthat #zwe
#zare #zconstrained #zin #zthe #zchoices #zwe #zcan #zmake #zabout #zwhich #zgoods #zand #zservices #zto #zproduce.
# z Thus, #zeconomics #zis #zoften #zdescribed #zas #zthe #zscience #zof #zconstrained #zchoice.
3. How #zdoes #zthe #ztool #zof #zconstrained #zoptimization #zhelp #zdecision #zmakers #zmake
#zchoices? #zWhat #zroles #zdo #zthe #zobjective #zfunction #zand #zconstraints #zplay #zin #za #zmodel #zof
#zconstrained #zoptimization?
Constrained #zoptimization #zallows #zthe #zdecision #zmaker #zto #zselect #zthe #zbest #z(optimal) #zalternative
#zwhile #zaccounting #zfor #zany #zpossible #zlimitations #zor #zrestrictions #zon #zthe #zchoices. # z The
#zobjective #zfunction #zrepresents #zthe #zrelationship #zto #zbe #zmaximized #zor #zminimized. # z For
#zexample, #za #zfirm’s #zprofit #zmight #zbe #zthe #zobjective #zfunction #zand #zall #zchoices #zwill #zbe
#zevaluated #zin #zthe #zprofit #zfunction #zto #zdetermine #zwhich #z yields #zthe #zhighest #zprofit. # z The
#zconstraints #zplace #zlimitations #zon #zthe #zchoice #zthe #zdecision #zmaker #zcan #zselect #zand #zdefines #zthe
#zset #zof #zalternatives #zfrom #zwhich #zthe #zbest #zwill #zbe #zchosen.
4. Suppose #zthe #zmarket #zfor #zwheat #zis #zcompetitive, #zwith #zan #zupward-sloping #zsupply
#zcurve, #za #zdownward-sloping #zdemand #zcurve, #zand #zan #zequilibrium #zprice #zof #z$4.00 #zper
#zbushel. #zWhy #zwould #za #zhigher #zprice #z(e.g., #z$5.00 #zper #zbushel) #znot #zbe #zan #zequilibrium
#zprice? #zWhy #zwould #za #zlower #zprice #z(e.g., #z$2.50 #zper #zbushel) #znot #zbe #zan #zequilibrium
#zprice?
If #zthe #zprice #zin #zthe #zmarket #zwas #zabove #zthe #zequilibrium #zprice, #zconsumers #zwould #zbe #zwilling
#zto #zpurchase #zfewer #zunits #zthan #zsuppliers #zwould #zbe #zwilling #zto #zsell, #zcreating #zan #zexcess
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z1
,Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
#zsupply. # z As #zsuppliers #zrealize #zthey #zare #znot #zselling #zthe #zunits #zthey #zhave #zmade #zavailable,
#zsellers #zwill #zbid #zdown #zthe
price to entice more consumers to purchase their goods or services. By definition, equilibrium is
a state that will remain unchanged as long as exogenous factors remain unchanged. Since in this
case suppliers will lower their price, this high price cannot be an equilibrium.
When the price is below the equilibrium price, consumers will demand more units than suppliers
have made available. This excess demand will entice consumers to bid up the prices to purchase
the limited units available. Since the price will change, it cannot be an equilibrium.
5. What is the difference between an exogenous variable and an endogenous variable
in an economic model? Would it ever be useful to construct a model that contained only
exogenous variables (and no endogenous variables)?
Exogenous variables are taken as given in an economic model, i.e., they are determined by some
process outside the model, while endogenous variables are determined within the economic
model being studied.
An economic model that contained no endogenous variables would not be very interesting. With
no endogenous variables, nothing would be determined by the model so it would not serve much
purpose.
6. Why do economists do comparative statics analysis? What role do endogenous
variables and exogenous variables play in comparative statics analysis?
Comparative statics analyses are performed to determine how the levels of endogenous variables
change as some exogenous variable is changed. This type of analysis is very important since in
the real world the exogenous variables, such as weather, policy tools, etc. are always changing
and it is useful to know how changes in these variables affect the levels of other, endogenous,
variables. An example of comparative statics analysis would be asking the question: If
extraordinarily low rainfall (an exogenous variable) causes a 30 percent reduction in corn supply,
by how much will the market price for corn (an endogenous variable) increase?
7. What is the difference between positive and normative analysis? Which of the
following questions would entail positive analysis, and which normative analysis?
a) What effect will Internet auction companies have on the profits of local automobile
dealerships?
b) Should the government impose special taxes on sales of merchandise made over the
Internet?
Positive analysis attempts to explain how an economic system works or to predict how it will
change over time by asking explanatory or predictive questions. Normative analysis focuses on
what should be done by asking prescriptive questions.
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z2
,Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
a) Because #zthis #zquestion #zasks #zwhether #zdealership #zprofits #zwill #zgo #zup #zor #zdown
#z(and #zby #zhow #zmuch) #z– #zbut #zrefrains #zfrom #zinquiring #zas #zto #zwhether #zthis #zwould
#zbe #za #zgood #zthing #z– #zit #zis #zan #zexample #zof #zpositive #zanalysis.
b) On #zthe #zother #zhand, #zthis #zquestion #zasks #zwhether #zit #zis #zdesirable #zto #zimpose
#ztaxes #zon #zInternet #zsales, #zso #zit #zis #znormative #zanalysis. # z Notably, #zthis
#zquestion #zdoes #znot #zask #zwhat #zthe #zeffect #zof #zsuch #ztaxes #zwould #zbe.
Solutions to Problems
#z #z
1.1 Discuss #zthe #zfollowing #zstatement: #z“Since #zsupply #zand #zdemand #zcurves #zare
#zalways #zshifting, #zmarkets #znever #zactually #zreach #zan #zequilibrium. #zTherefore, #zthe
#zconcept #zof #zequilibrium #zis #zuseless.”
While #zthe #zclaim #zthat #zmarkets #znever #zreach #zan #zequilibrium #zis #zprobably #zdebatable, #zeven #zif
#zmarkets #zdo #znot #zever #zreach #zequilibrium, #zthe #zconcept #zis #zstill #zof #zcentral #zimportance. # z The
#zconcept #zof #zequilibrium #zis #zimportant #zbecause #zit #zprovides #za #zsimple #zway #zto #zpredict #zhow
#zmarket #zprices #zand #zquantities #zwill #zchange #zas #zexogenous #zvariables #zchange. # z Thus, #zwhile
#zwe #zmay #znever #zreach #za #zparticular #zequilibrium #zprice, #zsay #zbecause #za #zsupply #zor #zdemand
#zschedule #zshifts #zas #zthe #zmarket #zmoves #ztoward #zequilibrium, #zwe #zcan #zpredict #zwith #zrelative
#zease, #zfor #zexample, #zwhether #zprices #zwill #zbe #zrising #zor #zfalling #zwhen #zexogenous #zmarket
#zfactors #zchange #zas #zwe #zmove #ztoward #zequilibrium. # z As #zexogenous #zvariables #zcontinue #zto
#zchange, #zwe #zcan #zcontinue #zto #zpredict #zthe #zdirection #zof #zchange #zfor #zthe #zendogenous
#zvariables, #zand #zthis #zis #znot #z“useless.”
1.2 In #zan #zarticle #zentitled, #z“Corn #zPrices #zSurge #zon #zExport #zDemand, #zCrop #zData,”
#zThe #zWall #zStreet #zJournal #zidentified #zseveral #zexogenous #zshocks #zthat #zpushed #zU.S. #zcorn
#zprices #zsharply #zhigher.(See #zthe #zarticle #zby #zAaron #zLucchetti, #zAugust #z22, #z1997, #zp. #zC17. #zon #znational
#zincome.) #zSuppose #zthe #zU.S. #zmarket #zfor #zcorn #zis #zcompetitive, #zwith #zan #zupward-sloping
#zsupply #zcurve #zand #za #zdownward- #zsloping #zdemand #zcurve. #zFor #zeach #zof #zthe #zfollowing
#zscenarios, #zillustrate #zgraphically #zhow #zthe #zexogenous #zevent #zdescribed #zwill #zcontribute
#zto #za #zhigher #zprice #zof #zcorn #zin #zthe #zU.S. #zmarket.
a) The #zU.S. #zDepartment #zof #zAgriculture #zannounces #zthat #zexports #zof #zcorn #zto
#zTaiwan #zand #zJapan #zwere #z“surprisingly #zbullish,” #zaround #z30 #zpercent #zhigher #zthan
#zhad #zbeen #zexpected.
b) Some #zanalysts #zproject #zthat #zthe #zsize #zof #zthe #zU.S. #zcorn #zcrop #zwill #zhit #za #zsix-year #zlow
#zbecause #zof #zdry #zweather.
c) The #zstrengthening #zof #zEl #zNiño, #zthe #zmeteorological #ztrend #zthat #zbrings #zwarmer
#zweather #zto #zthe #zwestern #zcoast #zof #zSouth #zAmerica, #zreduces #zcorn #zproduction #zoutside
#zthe #zUnited #zStates, #zthereby #zincreasing #zforeign #zcountries’ #zdependence #zon #zthe #zU.S.
#zcorn #zcrop.
Copyright #z© #z2014 #zJohn #zWiley #z& #zSons, Chapter #z1 #z-
#zInc. #z3
, Besanko #z& #zBraeutigam #z– #zMicroeconomics, #z5th Solutions
#zedition #zManual
a) Surprisingly #zhigh #zexport #zsales #zmean #zthat #zthe #zdemand #zfor #zcorn #zwas
#zhigher #zthan #zexpected, #zat #zD2 # z rather #zthan #zD1.
P
S
P2
# z
P1
D2
D1
Q
b) Dry #zweather #zwould #zreduce #zthe #zsupply #zof #zcorn, #zto #zS2 # z rather #zthan #zS1.
S2
P
S1
P2
P1
D
Q
c) Assuming #zthe #zU.S. #zdoes #znot #zimport #zcorn, #zreduced #zproduction #zoutside #zthe
#zU.S. #zwould #znot #zimpact #zU.S. #zcorn #zmarket #zsupply. # z El #zNino #zwould,
#zhowever, #zcause #zdemand #zfor #zU.S. #zcorn #zto #zshift #zout, #zthe #zfigure #zbeing #zthe
#zsame #zas #zin #zpart #z(a) #zabove.
1.3 In #zearly #z2008, #zthe #zprice #zof #zoil #zon #zthe #zworld #zmarket #zincreased, #zhitting #za #zpeak #zof #zabout
$140 #zper #zbarrel #zin #zJuly, #z2008. #zIn #zthe #zsecond #zhalf #zof #z2008, #zthe #zprice #zof #zoil #zdeclined,
#zending #zthe #zyear #zat #zjust #zover #z$40 #zper #zbarrel. #zSuppose #zthat #zthe #zglobal #zmarket #zfor #zoil
#zcan #zbe #zdescribed #zby #zan #zupward-sloping #zsupply #zcurve #zand #za #zdownward-sloping
#zdemand #zcurve. #zFor #zeach #zof #zthe #zfollowing #zscenarios, #zillustrate #zgraphically #zhow #zthe
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