• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economics Commentary: Ethanol as a substitute fuel.

Extracts from this document...

Introduction

Economics Commentary #1: Ethanol Word Count: 728 Scarcity has two definitions, and can be defined as when a good has more than one possible usage. This is the case with corn and soybeans. Corn can be used in two main ways; as food, or in the production of ethanol, a corn and soybean-based fuel that is gaining popularity in the United States. Ethanol is now being mixed with regular gasoline, and must constitute of 10% of the mixture in America in an attempt to become more environmentally friendly, as well as to be more self-sufficient. Since the United States is the top producer and exporter of corn, the production of corn-based ethanol protects the American economy from having to import as much high-priced oil from oil-producing nations. ...read more.

Middle

As to the decrease in supply, one must look at changes in supply. The prices of resources used to produce corn is rising, therefore, the lowest price a producer of ethanol that uses corn is willing to accept rises, so supply of the good decreases. The increase in the price of corn leads to a decrease in the supply of ethanol. Another major factor is expected future prices. The price of corn is expected to increase in the future, and the return from selling the good in the future is higher than it is currently. The supply decreases today, however will most likely increase in the future. The prices of related goods produced also affect the supply. A substitute of corn would be, for example, petroleum. If the price of corn increases, the supply of petroleum, decreases because they can be produced using the same resources, land and labour. ...read more.

Conclusion

That diverts corn from food production, raising the cost of food. Food prices in the United States increased six-tenths of one percent in February 2011. Because food is a necessity, consumers are spending higher percentages of their income on it, leaving less to buy other goods that they previously were able to afford, due to the income effect. Corn farmers are specializing in the production of corn for the production of ethanol and not for food as chemicals unsafe for humans to eat are used to speed up the growing process. Therefore, the amount of corn grown with human health in mind is reduced. Is ethanol a good idea, or will it raise food prices, the price of corn and eventually the price of fuel itself? We will see in the future, however, at this point, the production of ethanol is a booming industry. http://economics.about.com/cs/studentresources/a/micro_help.htm http://www.agriview.com/articles/2010/12/16/crop_news/crops03.txt http://www.ehow.com/how_2095469_make-ethanol.html http://www.theoildrum.com/node/3591 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. Extended Essay Economics

    This means that the supplier has to wait for payment and this causes a great deal of problems for the firm. The supplier may stop supplying their goods, and, while the firm waits for the supplier to get paid, they cannot import any more goods.

  2. case study economics

    Therefore the allocative optimality occurs when the supply equals demand on the market. Allocating available resources between industries so that it will not be possible to produce more of some goods without producing less of others is called efficiency in production.

  1. Macro Economics Notes

    SR keynes Monetarist Average AS Average AS Prices Prices Real GDP Real GDP LR keynes compromise Average AS Average AS Prices Prices Real GDP Real GDP Shifts in AD and AS - Caused by ? AD shifts are caused by Changes in tax rates and government spending (fiscal policy)

  2. Free essay

    Commentary on six Economics Articles

    There was revenue of $11.6 billion this year. Over $600 million of the loss could have been blamed for an unwanted foreign currency exchanging on the dollar. This earning happened when it got together with Wyeth, after the report of Pfizer for illegal marketing techniques.

  1. The future of Eli Lilly

    This is the case, as Eli Lilly was eager to get into the growing Indian market and Ranbaxy was interested in offering its intermediate products to the American company. Secondly, collaboration is the optimal form, which again is the case with the Eli Lilly Ranbaxy.

  2. Commentry on Rising Fuel Prices

    But now with airfares on the rise, this connectivity is under severe threat. Airlines have already started pulling out of unprofitable centres. SpiceJet executive chairman Siddhanta Sharma gave the airlines' perspective. "Basically flights from most small cities are short haul.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work