
Figure 15.2 Supply-Side Input Links across Industries
(a) The increase in the demand for corn shifts demand from
Dc1 to
Dc2. As a result, the quantity of corn increases from
Qc1 to
Qc2, and the price of corn increases from
Pc1 to
Pc2.(b) The increased demand for corn causes farmers to shift some of their production from wheat to corn. Consequently, the supply of wheat shifts in from
Sw1 to
Sw2. The quantity of wheat decreases from
Qw1 to
Qw2, and the price of wheat increases from
Pw1 to
Pw2. The resulting increase in the wheat price feeds back in turn to the corn market, shifting the supply of corn from
Sc1 to
Sc2, reducing the quantity of corn to
Qc3 and raising its price to
Pc3, because of increases in the price of inputs into corn production.