CAN GOOD NEWS FOR FARMING BE
BAD NEWS FOR FARMERS?
Let’s now return to the question posed at the beginning of this chapter: What happens
to wheat farmers and the market for wheat when university agronomists discover
a new wheat hybrid that is more productive than existing varieties? Recall
from Chapter 4 that we answer such questions in three steps. First, we examine
whether the supply curve or demand curve shifts. Second, we consider which direction
the curve shifts. Third, we use the supply-and-demand diagram to see how
the market equilibrium changes.
In this case, the discovery of the new hybrid affects the supply curve. Because
the hybrid increases the amount of wheat that can be produced on each acre of
land, farmers are now willing to supply more wheat at any given price. In other
words, the supply curve shifts to the right. The demand curve remains the same
because consumers’ desire to buy wheat products at any given price is not affected
by the introduction of a new hybrid. Figure 5-8 shows an example of such a
change. When the supply curve shifts from S1 to S2, the quantity of wheat sold increases
from 100 to 110, and the price of wheat falls from $3 to $2