[Hoot Gibson]

Yes, demand will go down. As supply (corn) increases, the demand for it will decrease. It may be by just a little bit since corn is relatively inelastic, but the demand will go down.

You have this backward. As the supply of a commodity increases, prices decrease, and demand increases. Decreasing the supply of a commodity will increase its price and decrease the demand for that commodity. (Assuming other factors affecting the demand remain constant.)

[ukyfootball]

You have this backward. As the supply of a commodity increases, prices decrease, and demand increases. Decreasing the supply of a commodity will increase its price and decrease the demand for that commodity. (Assuming other factors affecting the demand remain constant.)

Actually you have this backward, though youre on the right track. Price is the driving factor. As prices increase, supply will increase and demand will decrease.

When prices decrease, the producer will not supply as much of the good.

[Hoot Gibson]

Actually you have this backward, though youre on the right track. Price is the driving factor. As prices increase, supply will increase and demand will decrease.

When prices decrease, the producer will not supply as much of the good.

Prices are not the driving force in the trade of commodities - they are a reflection of the relationship of supply and demand. You said "As supply (corn) increases, the demand for it will decrease" and that is not an accurate interpretation of the laws of supply and demand. Holding all other variables constant and increasing the supply will not decrease demand...it will do the exact opposite because prices will fall and units sold will increase. Corn growers cannot increase the supply of corn after a harvest and they have very little control over the price of corn.

Producers of a commodity do not set prices in a free market. They sell their product at the market price. In the case of corn, factors like global weather patterns in corn-producing areas, transportation costs, government regulations, subsidies, and the emergence of new markets for corn (such as ethanol as a fuel) affect the supply of and demand for corn.

The basic law of supply and demand govern the trade of all commodities, whether that commodity is corn, coal, or pork bellies. If subsidies were eliminated, some farms would go under but the price of corn would theoretically increase if foreign producers could not make up the loss of production from American producers.

[ukyfootball]

Prices are not the driving force in the trade of commodities - they are a reflection of the relationship of supply and demand. You said "As supply (corn) increases, the demand for it will decrease" and that is not an accurate interpretation of the laws of supply and demand. Holding all other variables constant and increasing the supply will not decrease demand...it will do the exact opposite because prices will fall and units sold will increase. Corn growers cannot increase the supply of corn after a harvest and they have very little control over the price of corn.

Producers of a commodity do not set prices in a free market. They sell their product at the market price. In the case of corn, factors like global weather patterns in corn-producing areas, transportation costs, government regulations, subsidies, and the emergence of new markets for corn (such as ethanol as a fuel) affect the supply of and demand for corn.

The basic law of supply and demand govern the trade of all commodities, whether that commodity is corn, coal, or pork bellies. If subsidies were eliminated, some farms would go under but the price of corn would theoretically increase if foreign producers could not make up the loss of production from American producers.

If theres a huge surplus of a product, theres not much demand for it since the product is readily available. You see this with subsidies. In the great depression the government paid farmers to lower supply of corn, which created demand and increased prices.

[Hoot Gibson]

If theres a huge surplus of a product, theres not much demand for it since the product is readily available. You see this with subsidies. In the great depression the government paid farmers to lower supply of corn, which created demand and increased prices.

When there is a huge surplus of a commodity, the unmet demand for it disappears but the number of units consumed increases because the price decreases. For example, lower corn prices lowers the cost of beef, which results in more consumption of corn, and an increase in the production of beef and a corresponding increase in the consumption of corn.

Governments sometimes pay farmers to reduce acreage planted in a particular crop and sometimes they purchase and stockpile the commodity for the same reason - to raise its price. These efforts to provide price supports for crops and if successful, they will reduce the consumption of the product.

[Deathstar 80]

:yikes: I didn't think people could post about corn for three pages long... and now I know. :biggrin:

[ukyfootball]

When there is a huge surplus of a commodity, the unmet demand for it disappears but the number of units consumed increases because the price decreases. For example, lower corn prices lowers the cost of beef, which results in more consumption of corn, and an increase in the production of beef and a corresponding increase in the consumption of corn.

Governments sometimes pay farmers to reduce acreage planted in a particular crop and sometimes they purchase and stockpile the commodity for the same reason - to raise its price. These efforts to provide price supports for crops and if successful, they will reduce the consumption of the product.

You finally got this correct.

[Hoot Gibson]

You finally got this correct.

I had it right from the beginning. You implied that consumption decreased in the face of a surplus.

[ukyfootball]

I had it right from the beginning. You implied that consumption decreased in the face of a surplus.

I didnt imply anything, I just said demand went down. As prices go up, supply goes up (law of supply). As prices go up, demand goes down (law of demand).

[Hoot Gibson]

I didnt imply anything, I just said demand went down. As prices go up, supply goes up (law of supply). As prices go up, demand goes down (law of demand).

Not exactly. What you said was...

This is not true. More corn will be grown (the government still pays for peeps not to grow corn), resulting in more supply. This will make the demand go down, and in turn, costs for consumers.

...which is not true. If the government stopped paying subsidies, then farmers would not be paid to not grow corn because that would be a subsidy by definition. You also said...

Yes, demand will go down. As supply (corn) increases, the demand for it will decrease. It may be by just a little bit since corn is relatively inelastic, but the demand will go down.

...which is also wrong. Increasing supply will not decrease the demand for corn. Cattle will still need to eat and increasing supply translates to a reduction in price, which would result in a greater consumption of corn. You may have meant to stipulate that the increase in supply was precipitated by an increase in price but you did not do so.

Growing corn is a cyclical process. Growing corn is not like manufacturing widgets because the cycle time to produce corn is much longer.

Market conditions can change drastically from the time that crops are planted to when they are harvested. A large corn surplus is more likely to occur because of favorable weather over the course of a growing season than because of an increase in the acreage planted.

I support eliminating subsidies but such an elimination should be coupled with extensive deregulation of American agriculture. Our farmers are the most productive in the world but they need a level playing field to compete globally without subsidies.

[ukyfootball]

Not exactly. What you said was...

...which is not true. If the government stopped paying subsidies, then farmers would not be paid to not grow corn because that would be a subsidy by definition. You also said...

...which is also wrong. Increasing supply will not decrease the demand for corn. Cattle will still need to eat and increasing supply translates to a reduction in price, which would result in a greater consumption of corn. You may have meant to stipulate that the increase in supply was precipitated by an increase in price but you did not do so.

Growing corn is a cyclical process. Growing corn is not like manufacturing widgets because the cycle time to produce corn is much longer.

Market conditions can change drastically from the time that crops are planted to when they are harvested. A large corn surplus is more likely to occur because of favorable weather over the course of a growing season than because of an increase in the acreage planted.

I support eliminating subsidies but such an elimination should be coupled with extensive deregulation of American agriculture. Our farmers are the most productive in the world but they need a level playing field to compete globally without subsidies.

I was applying economics to the situation. Anytime supply increases, demand decreases. The demand for corn will not be of a high amount because there is so much more corn in the market. Thats just how it works. As I said before, the laws of demand and supply are driven by price.

[Hoot Gibson]

I was applying economics to the situation. Anytime supply increases, demand decreases. The demand for corn will not be of a high amount because there is so much more corn in the market. Thats just how it works. As I said before, the laws of demand and supply are driven by price.

The demand for corn does not drop following a favorable growing season that results in a surplus because the increase in supply is not the result of a price increase. Increases (or decreases) in supply are not necessarily preceded by price increases in the case of commodities. In some cases, particularly in the case of commodities like corn, price changes follow changes in supply or expected changes in supply.

Idealized supply and demand curves assume other factors are held constant but that is rarely true in the real world. You mentioned nothing about price in the initial post that I corrected.

This is my last post on the subject. You do not seem to understand how to apply the laws of supply and demand apply to real world situations and I do not know how to explain it to you any better. I have outlined a common scenario where the price of corn changes in reaction to a surplus. Price does not always drive supply, especially over the short term where commodities are concerned. Repeatedly typing the laws of supply and demand from your Econ 101 textbook here will not change that fact.

[ukyfootball]

The demand for corn does not drop following a favorable growing season that results in a surplus because the increase in supply is not the result of a price increase. Increases (or decreases) in supply are not necessarily preceded by price increases in the case of commodities. In some cases, particularly in the case of commodities like corn, price changes follow changes in supply or expected changes in supply.

Idealized supply and demand curves assume other factors are held constant but that is rarely true in the real world. You mentioned nothing about price in the initial post that I corrected.

This is my last post on the subject. You do not seem to understand how to apply the laws of supply and demand apply to real world situations and I do not know how to explain it to you any better. I have outlined a common scenario where the price of corn changes in reaction to a surplus. Price does not always drive supply, especially over the short term where commodities are concerned. Repeatedly typing the laws of supply and demand from your Econ 101 textbook here will not change that fact.

Just stating the laws of supply and demand.

[Beetle01]

Okay since we got econ 101 out of the way, lets look at how it affects corn.

We already know the govt uses the subsidies to keep the price low, so the business/livestock farmers can buy it super cheap, and keep costs low on Americans. My point is, if you take away the subsidies the price of corn is going to sky rocket, as farmers will not be able to continue to sell the product at or below cost, or there wont be any corn farms left. Even if the price does sky rocket, the demand is not going to slow that much, corn is used in so many products and for feed, the demand will stay high. So the consumer will see a huge increase in the grocery bill. How much? I dont know but doubled or tripled is a low estimate. Not just our food either, corn based ingredients are used in -

pet food, lubricants, paper making, cleaning supplies, solvents, cosmetics, bedding, absorbents, trash bags and liners, just about every plastic, pharmaceuticals, supplements, water treatment, and the list goes on and on.

So no, even if the price sky rocketed, demand would still remain high.