+1 862 207 3288 supply-and-demand diagram
The prices received by soybean farmers in Brazil, the world’s second-largest soybean producer and exporter, tumbled 30%, in part because of China’s decision to cut back on imports and in part because of a bumper soybean crop in the United States, the world’s leading exporter (Todd Benson, “A Harvest at Peril,” New York Times, January 6, 2005, C6). In addition, Asian soy rust, a deadly crop fungus, is destroying large quantities of the Brazilian crops.
a. Use a supply-and-demand diagram to illustrate why Brazilian farmers are receiving lower prices.
b. If you knew only the direction of the shifts in both the supply and the demand curves, could you predict that prices would fall? Why or why not?
supply-and-demand diagram
