20. What is likely to happen to the Demand for irrigation water when corm prices
ID: 1142527 • Letter: 2
Question
20. What is likely to happen to the Demand for irrigation water when corm prices rise significantly due to an ethanol boom? (don 't calculate numbers, just state whether aggregate demand increases or decreases) a Demand increases (shifts up) price rises, quantities sold increase b. Demand decreases (shifts down) price falls, quantities sold decrease c. Supply increases (shifts down) price falls, quantities sold increase d. Supply decreases (shifts up) price rises, quantities sold decrease the water Demand curve when corn prices stay the same but there 21,. What is likely to happen to new federal subsidies for drip irrigation (uses irrigation water much more efficiently)? y calculate numbers, just state whether aggregate demand increases or decreases) nemand decreases (shifts down) price falls, quantities sold decrcase Demand increases (shifts up) s price rises, quantities sold increase c. Supp d. Supply decreases ly increases (shifts down)price falls, quantities sold increase ses (shifts up) price rises, quantities sold decrease up)Explanation / Answer
20) Option A
There is an ethanol boom so the producers of Ethanol will demand more corn because it is a major raw material. The suppliers of corn experience an increase in the price of corn so they are likely to produce more. To do this they need more raw materials including water for irrigation. Therefore the demand for water will increase and the demand curve should try increasing the price and quantity.
21) Option A
It is given that drip irrigation will use irrigation water more efficiently. It is similar to a situation where the marginal productivity is increased which increases the demand for factors. Therefore the demand for water will increase and quantity and price both will increase.
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