Discussion Economics - 275 Words

Discussion: Economics (Coursework Sample) Content: Discussion 4NameInstructorCourseDateOne of the most notable obstacles is drought, which has reduced the overall production of corn by 30% thus hindering the efficiency that was being experienced in the market. The opportunity cost of ethanol in terms of bushels of corn equals to the amount of corn that was used for food purposes. It follows that 6 million bushel represents the opportunity cost of ethanol in the year 2010. After the mandate that required 50% of corn for the production of corn, the opportunity cost in 2011 was 3.5 million bushels. This is because the overall production reduced from 10 million in 2010 to 7 million in 2011 thus providing a 30% decrease.The market was efficient before the mandate where the demand and supply of corn for both food and ethanol purposes seemed to be in equilibrium. The farmers were able to satisfy the divergent needs of the users of these products unlike after the mandate where there were shortages in terms of corn being alloc ated to food. Components that meet efficient allocation are where the demand and supply for corn are catered for effectively. This is without tendencies of rationing that are brought about by supply deficits that have been caused by the drought and substantial increase in the demand for ethanol production.A government subsidy of $0.99 per gallon will decrease the cost of production thus leading to increased demand for corn. Producers of ethanol shall be pressurized to increase their production capacities since the consumers will be encouraged to purchase additional gallons. It shall affect the product possibility frontier in the sense that there shall be an increased allocation of corn to the production of ethanol while there shall be a reduction of the amount set aside for food purposes.The action that ca...