Consider the market for corn. Say whether each of the following events will cause a shift in the demand curve or a movement along the curve. If it will cause a shift, specify the direction.

a) A drought hits corn-growing regions, cutting the supply of corn. 


b) The government announces a new subsidy for biofuels made from corn. 


c) A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is a normal good).

d) A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre.

e) An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef.

Answer: a) A drought hits corn-growing regions, cutting the supply of corn - There is a movement along the curve, as there is less corn supply and demand remains the same, the price of corn increases and produces a movement along the curve.

b) The government announces a new subsidy for biofuels made from corn. - Demand shifts to the right (increases).

c) A global recession reduces the incomes of consumers in poor countries, who rely on corn as a staple food (assuming corn is a normal good). - Demand shifts to the left. (decreases)

d) A new hybrid variety of corn seed causes a 15 percent increase in the yield of corn per acre. - There is a movement along the demand curve, because the event modifies the supply (which increases).

e) An advertising campaign by the beef producers' association highlights the health benefits of corn-fed beef. - The demand curve shifts to the right (increases).

Explanation: The changes in the quantity demanded along the curve, arise from a change that has to do with the price of the good, instead, the changes in the demand curve, arise from the changes in the variables that are not related to the price.