The Demand for Corn - Research Paper Example

One would have expected the price of corn to decrease due to the increase in the quantity demanded, but this is a different and special case. The increase in the demand for corn would also lead to an increase in the price of corn oil as suppliers would want to take advantage of the market scenario by maximizing their profits. Suppliers are aware that consumers have no choice but to make use of corn as an alternative source of energy and they would increase the price. Thus, the increase in the demand for corn and the price of corn oil has a linear relationship in this case.

In a typical scenario, the price elasticity of demand for corn oil would have an effect on the quantity demanded of corn oil (O'Sullivan & Perez, 2010). Initially, people would buy the commodity and the suppliers would make good use of the rapid increase in demand by increasing the price. This increase in price would have an initial multiplying effect on the total revenue made by the sellers of corn oil. This increase in price would make cause people to look for other alternatives and when they eventually find another alternative, they would have no choice but to reduce the rate at which they demand corn and choose close substitutes (Jones, 2008). Thus, there would be a gradual reduction in the total revenue of corn oil and a reduction in the quantity demanded of the commodity and this is the effect of price elasticity of corn oil on the quantity demanded and the total revenue earned by sellers of corn oil.