Thursday, July 19, 2012

Who says corn does not matter?



This is a great chart on how corn has in impact throughout the economy. This will translate into higher prices across many markets. This shock is not inflationary but will show up in the inflation numbers across countries.

The industrial use of corn has been driven by its cheap price. If the price stays high, substitutes will be found. The changing of the demand curve is always a question of time. How fast will elasticities change for a given shock to price. In the real world, there is movement down the demand curve, a shifting of the demand curve, and a changing of the slope of the demand curve. It is never easy to break apart these changes. This is what makes market analysis so difficult.

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