1. (

10 points

) Ethanol is a fuel that is produced from corn. Ethanol can be used as a fuel in

certain types of cars and some varieties of gasoline have ethanol blended in them. Producing

corn for ethanol has become very popular over the last 20 years since it is very profitable. In

many parts of the country there are government mandates for blending ethanol into the gasoline

that is sold by gas stations. This has led to an increased production of ethanol and therefore the

use of corn to produce ethanol. Ethanol producers are willing to pay higher prices for corn than

consumers of corn for food. If corn is used for producing ethanol, it cannot be used as food.

What impact has this had on the supply of corn for the food industry and the price of corn for

food? Please explain and show the changes on a demand-supply graph for the corn for food

industry. Your graph must show any shift of the curves that occurs and explain why that shift

occurred.