Due to fear about mad cow disease, Japan stopped importing animal feed from Britain in 1996, beef imports and processed beef products from 18 countries including EU members starting in 2001, and similar imports from Canada and the United States in 2003. After U.S. beef imports were banned, McDonald’s Japan and other Japanese importers replaced much of the banned U.S. beef with Australian beef, causing an export boom for Australia (“China Bans U.S. Beef,” cnn.com, December 24, 2003; “Beef Producers Are on the Lookout for Extra Demand,” abc.net.au, June 13, 2005). Use supply and demand curves to show the impact of these events on the domestic Australian beef market.

The prices received by soybean farmers in Brazil, the world’s second-largest soybean producer and exporter, tumbled 30%, in part because of China’s decision to cut back on imports and in part because of a bumper soybean crop in the United States, the world’s leading exporter (Todd Benson, “A Harvest at Peril,” New York Times, January 6, 2005, C6). In addition, Asian soy rust, a deadly crop fungus, is destroying large quantities of the Brazilian crops.

a. Use a supply-and-demand diagram to illustrate why Brazilian farmers are receiving lower prices.

b. If you knew only the direction of the shifts in both the supply and the demand curves, could you predict that prices would fall? Why or why not? V