When more corn is planted due to the higher demand from ethanol producers, both cattle ranchers and ethanol producers will end up buying more corn?

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Business

Lailah Mcfarland

13 June, 23:38

When more corn is planted due to the higher demand from ethanol producers, both cattle ranchers and ethanol producers will end up buying more corn?

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Answers (1)

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Patricia Velasquez · Answer 1

Corn is used for two purposes -

1. As feed for cattle.

2. As input in production of ethanol.

It has been stated that increase in demand from ethanol producers does not impact the demand made by cattle ranchers'.

Farmers would only respond with planting of more corn if they can get higher price.

So, it can be stated that higher demand from ethanol producers has raised the price of corn which in turn has induced the farmers to plant more corn.

However, as price of corn is rising, quantity demanded by cattle ranchers' will decline.

So, when more corn is planted due to higher demand from ethanol producers, only ethanol producers end up buying more corn while cattle ranchers' witness a decline in their purchase of corn.

In other words, cattle ranchers' will end up buying less.

So, the given statement is False.