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

For years, Anthony Gallis, his wife, and their four children traveled from Dallas, Pennsylvania to South Bend, Indiana where they rented a house for $1,200 a weekend so that they could see Notre Dame football games. On the weekend of the 2006 home opener against Penn State, someone else arranged to rent his house months earlier, and another house recommended to him at $3,000 was also taken. A parking pass sold for $500, and a pair of tickets with face prices of $59 went for $3,200 for the Penn State game on eBay. Hotel prices and the cost of restaurant meals are also much higher on football weekends than during the other 341 days of the year—particularly in years when Notre Dame is expected to have a winning season. (Ilan Brat, “Why Fans Pay Through the Nose to See Notre Dame,” Wall Street Journal, September 7, 2006.) Use a supply-and demand diagram to illustrate why, when the demand curve shifts to the right, the prices of hotel rooms and rental apartments shoot up. (Hint: Carefully explain the shape of the supply curve, taking into account what happens when capacity is reached, such as occurs when all hotel rooms are filled.)