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30 CHAPTER 2 DEMAND AND SUPPLY ANALYSIS

S

Price (dollars per bushel) $4 E

$3

FIGURE 2.2 The Market for Corn in the
United States in 2009 D
The curve labeled D is the demand curve for
corn. The curve labeled S is the supply curve 9 11 14
for corn. Point E, at which the two curves Quantity (billions of bushels per year)
intersect, is the market equilibrium.

commodity––the product bought and sold (in Figure 2.2 this is corn); geography––the
location in which purchases are being made (in Figure 2.2 this is the United States);
and time––the period of time during which transactions are occurring (in Figure 2.2,
this is the year 2009, when corn prices were about $4 per bushel).

DEMAND CURVES
market demand curve The curve D in Figure 2.2 is the market demand curve for corn. It tells us the quan-
A curve that shows us the tity of corn that buyers are willing to purchase at different prices. For example, the
quantity of goods that con- demand curve tells us that at a price of $3 per bushel, the annual demand for corn
sumers are willing to buy would be 14 billion bushels, while at a price of $4 per bushel, the annual demand for
at different prices.
corn would be only 11 billion bushels.
Corn supplies are bought by companies (such as Archer Daniels Midland and
General Mills) that process the corn into intermediate products (e.g., high fructose
corn syrup or corn grits), which in turn are used to make final products (e.g., soft
derived demand drinks or breakfast cereal). Part of the demand depicted in Figure 2.2 is derived
Demand for a good that is demand––that is, it is derived from the production and sale of other goods. For ex-
derived from the produc- ample, the demand for high-fructose corn syrup is derived from the demand for soft
tion and sale of other drinks in which it is used as a sweetener (instead of sugar). Corn is also purchased by
goods.
brokers and wholesale distributors, who then sell it to retailers who then resell it to
final consumers. Thus, another part of the demand for corn depicted in Figure 2.2
direct demand is direct demand––demand for the good itself. The demand curve D is a market
Demand for a good that demand curve in that it represents the aggregate demand for corn from all the corn
comes from the desire of purchasers in the U.S. market.
buyers to directly consume In Figure 2.2, we have drawn the demand curve with price on the vertical axis
the good itself.
and quantity on the horizontal axis. This representation emphasizes another useful