Examine the market structure of the corn market

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In the rural area of a large agricultural-based economy in which corn is the staple food, there are many small farmers, each of them planting corns in a small piece of land using the same plantation method. Upon harvesting, they will deliver their corns to the city and sell them to the large population of customers in the city. The corn farmers do not have any bargaining power in determining the price of their corns. The corn price is determined by the market demand and supply, but each farmer will have no problem selling all their corns at the market equilibrium price.

(a) Examine the market structure of the corn market. Draw a suitable corn market and also an individual farmer's demand and supply diagrams to illustrate the initial situation in the corn market where all farmers are earning normal profit. Your diagrams should reflect the correct shape for the corn market demand and supply curves based on your understanding of the price elasticity of demand and supply of corns.

(b) It is discovered that consuming corn is beneficial to health. Appraise the short run and the long run effects on the corn market as well as the individual corn farmer following this discovery.

(c) There is no incentive for the corn farmers to carry out innovation in this corn market. Do you agree? Explain.

Reference no: EM133130607

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