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Under What Conditions Would Ethanol be in Society’s Best Interest?

Under What Conditions Would Ethanol be in Society’s Best Interest?. Charles B. Moss, Troy G. Schmitz, and Andrew Schmitz. Welfare Effects with Government Programs. Welfare Impacts of a Shift in Corn Demand. Added Effects of Ethanol Measured in the Fuel Market.

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Under What Conditions Would Ethanol be in Society’s Best Interest?

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  1. Under What Conditions Would Ethanol be in Society’s Best Interest? Charles B. Moss, Troy G. Schmitz, and Andrew Schmitz

  2. Welfare Effects with Government Programs

  3. Welfare Impacts of a Shift in Corn Demand

  4. Added Effects of Ethanol Measured in the Fuel Market

  5. Summary of Welfare Costs and Benefits: U.S. Ethanol Production

  6. Comparisons

  7. Current Policy Scenario

  8. Simplified CGE Original Equilibrium

  9. Subsidizing Ethanol Production

  10. Equilibrium Changes • Original Equilibrium • Equilibrium After Ethanol Subsidy

  11. Effect of Subsidy on Price/Budget Line

  12. A Simplified CGE of Subsidizing Ethanol • Simplify the economy to four outputs • Agriculture/Food • Manufactured Goods • Energy • Ethanol • Ethanol will be assumed to be an imperfect substitute for energy

  13. Inputs • Capital • Labor • Energy (primary energy) • Materials • Land

  14. General Equilibrium Capital Labor Energy Materials Land Agriculture Energy Manufacture Ethanol Agriculture Manufactured Energy

  15. Production of Ethanol (Biofuels) Capital Labor Energy Materials Ag. Output Ethanol (Biofuels) Energy Ag. Biproduct

  16. CES Production and Utility Functions • Utility and Production Functions • Input and Output Demands

  17. Excess Demand Relationships • Excess Demand Functions • First determine the demand for outputs • Compute excess demands for inputs

  18. Solution • Objective Function • Income closure • Zero profit restriction • Price normalization

  19. Input/Output Relationships • Energy Demand • Agricultural Demand • Manufactured Goods

  20. Effect in Output Market

  21. Change in Input Prices

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