econ read and answer

Name Class Date

CASE STUDY

Price and Opportunity Cost

All choices involve opportunity costs. There is always a next most desirable alternative

that we reject in favor of the option we choose. For many decisions, all things being equal,

people are likely to pick the same option when faced with the same choices. They choose

that option based on their resources and their values. However, circumstances change,

and that affects the choices that people make. Read the case study, and then answer the

questions that follow.

In recent years, agricultural companies

have used technology to develop new

strains of plants. They do so by altering a

plant’s genes—the material inside plant

cells that determines the plant’s traits.

Scientists can make the plants better able

to resist insects or infections.

These biologically engineered crop

plants are labeled as “genetically

modified,” or “GM.” Some critics call

the crops “Frankenfoods,” generating

frightening parallels with Frankenstein’s

monster. The name underscores the

concern that these foods might not be

healthful.

Europeans, in particular, have been

hostile to GM crops. Some European

countries banned the growth or sale of

GM crops. American wheat growers, who

sell half their crop abroad, refused to buy

GM wheat. They were afraid they would

not be able to sell their crops if they used

GM strains. Some companies around the

world were even willing to pay slightly

higher prices for non-GM plant products.

GM plants, then, have not always had a

welcome reception. That changed in 2008,

however—at least for some buyers. Rising

oil prices in recent years had led many

countries to begin processing corn not as

food or animal feed but into ethanol, a

fuel that can be used to run vehicles. Some

farmers were happy to make the change—

they could sell their corn for higher

prices. However, this new use of corn had

another effect: it made the supply of corn

scarcer, raising food prices.

As a result, some businesses that had

previously stayed away from GM plants

had to make new choices. The price of

regular corn rose so sharply that it cost

$100 a metric ton more than GM corn.

South Korean companies that process

corn had to buy the less-expensive GM

variety to control their costs. Even in

Europe, companies that raised livestock

began to complain that laws banning GM

animal feed could hurt them financially.

Facing rising prices, they wanted access to

cheaper, GM alternatives

1. (a) How are GM foods different from regular foods? (b) How did some people show their opposition to GM foods?

2. (a) What was the opportunity cost of non-GM food for many buyers before 2008? (b) Why did they prefer the alternative? (c) What was the opportunity cost in 2008? (d) Why did it change?

3. (a) What do you think will happen if the price of non-GM crops continues to rise? Why? (b) What will happen if the price of non-GM food drops? Why?

4. Describe an economic choice you have made or know of that was based on non- economic considerations.