Rising oil prices over the past several years have prompted increased interest i

Question

Rising oil prices over the past several years have prompted increased interest in alternative fuel sources. One of those fuel sources is ethanol, with corn as the primary ingredient. The Financial Times article, "Grains fuelled by alternative uses" outlines a chain of events which is a textbook example of how the forces of supply and demand allocate resources. It also provides a great real-world example of interrelated goods.

Now, consider other products (goods and services) beside wheat and soyabeans. Which product (good or service) would likely have its price affected by the increased demand for corn?

Explanation / Answer

The price of oil will be affected as corn is used in making its substitute.

Since corn is used in corn oil, the price of substitutes like groundnut, sunflower, palm etc. will grow too.

Since corn is used in syrup, the price of substitutes like honey, maple syrup etc. will grow too.

Since corn is used for starch, the price of substitutes like potato starch, rice starch etc. will grow too.

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