Question

If the government subsidizes the construction of ethanol refineries, how does that affect the corn market?

demand increse or decrease

OR

supply increase or decrease

Answer 1

Since ethanol is made from a starch product, such as corn, there will be a greater demand for corn. Economics has to do with "supply and demand." Decrease the supply and there won't be enough for the demand. Flood the market with something and there will be a surplus because there won't be enough demand for all of it.

Sra