Question

3. (11 marks) Answer with reference to the following article. Genetically Modified Foods A gentetically modified (GM) food has had its DNA altered through genetic engineer rather than through conventional breeding. The first commercial GM food was Calgene's Flavr Savr tomato that resisted rotting, which the company claimed would enable it to stay on the vine longer to ripen. It was first marketed in 1994 without any special labeling. Other common GM crops include canola, cotton, rice and sugar cane. Using GM seeds, farmers can produce more output at a given cost. As of 2015, the largest producers of GM food crops were (in order) the United States, Brazil, Argentina, Canada and China. However, some scientists and consumer groups have raised safety concerns about GM crops, and these concerns have been particularly influential in Europe. According to some polls, 70% of consumers in Europe object to GM foods. Consumers in other countries, such as the United States, are less concerned about GM foods. Adopted from a Mini-Case of Managerial Economics and Strategy, 2nd edition, Brander and Perlof Suppose some unlabeled GM corns have been introduced in the com market and consumers can't distinguish between labeled and unlabeled GM com. Based on the above article, discuss how the introduction of GM com affects both the demand for and supply of com. (4 marks)

Answer 1

1.a>in The first diagram, the supply curve shifts to the right because of the introduction of new GM seeds so that it created mo0re output but the demand curve remains unchanged. thus the equilibrium price falls and equilibrium output rises.

In other diagram Bi>

The supply curve shifts to the right due to new hybrid seeds GM but the demand shifts to the left because in the Europe market consumers are very concerned about GM foods, they object it thus will demand less .As a result the equilibrium price falls and equilibrium output will also fall in the market.

Bii>

This is the better illustration of Europe market because the consumers are very concerned about GM food they object it but in the US market consumer does not bother much about GM foods.

Introduction GM corn on the demand and Supply of coom SI S. Price Supply shifts to the right. Demand remain Same & Qq Oty of supply shifts to the right Demand Shifts BE - - - downward from Di to Dz. Pat - 02 Europe market is better illustrated in the above given diagram.