Question

Which economic theories (Shaikh's model of competition, the perfectly competitive supply and demand curve model) shed light on the processes of price, cost, profitability and social impact of the subsidies ( if can, on corn industry)

Answer 1

The perfectly competitive supply and demand model is based on fact that prices are an effect of supply by sellers and demand by buyers and hence an economic profit is assigned to it. In perfect competition many small llayers of equal sizes compete such that prices are determined by industrial players and subsequently others match the price and lower down costs to boost profitability and sustainability. Here equilibrium price is determined at point where supply and demand curves will intersect.

Also government in this case offers subsidies which has social impact on consumers as the producer or seller now gets subsidies which lowers their costs of production if corn and hence higher volumes are produced and consequently market prices get reduced effectively having net social positive impact on consumers as they tend to consume more and are better off due to health benefits of corn which is available at lower prices.