Price of corns in terms of USD($)

Q3
Quantity of Corns
Diagram 1 : Inflation Price of Corn

The article outlines the current inflation of the primary commodities due to a decrease in supply

and the steps taken by the government to decrease the externalities to the society as a whole.

Demand is simply defined as the consumer's desire and willingness to pay a price for a specific good
or service. Supply on the other hand means the desire and willingness of producers to produce/sell a
good at a specific price at a given period of time. Based on the article, the issue leading to inflation is
due to the problems faced by producers (firms) producing primary commodities which causes a
decrease in the potential supply for the necessity.

The drastic increase in price of primary commodities from the year 2006 to this year has led the
United States Of America to a major problem up ahead. Necessities such as wheat in Chicago have
been doubling its prices to $9.66 per bushel since the year 2006. On the other hand, corns mark ups
at $4.39 per bushel, and increase in $1.39 per bushel since the year 2006. The bad weather in
exporting countries such as Australia also gives a large effect on the inflation rate there.

The factor that causes an increase in price of the corn was due to the decrease in supply of corns
from producers from Q1 to Q2. This causes a shift in the supply curve to the left indicating a
decrease in supply causes my other non-price determinants. This is shown in the diagram from a
shift in supply from S1 to S2. The market prices thus increases from P1 to P2. This indicates a rise in
price in the form of $3 to $9.66. All of these factors thus causes a shortage from Q3 to Q1.

The issue further arouses as corns are regarded as primary commodities to the consumers. This
causes them to have an inelastic nature. This is further proven as corns are regarded as raw
materials. PED is defined as a measure to show the responsiveness, or elasticity, of the quantity
demanded of a good or service to a change in its price ceteris paribus. From the graph, there will be
a more than proportionate change in price than quantity supplied, thus when the quantity supplied
has fallen, there will be a greater change in price impose on corns,thus causing the price to increase
from P1 to P2. This is the main concern to the United States of America. This will lead to a higher
increment in terms of primary commodities among growing countries such as the likes of India and
China.