Adm Macroeconomics
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ADMs demands are positive income elasticity, but many factors would limit the demand growth. As income changes so does the market. The market rise for ethanol and bio-fuels would generate more competition. The competition would steady the growth for production from ADM. Developing fuels requires governmental regulations, manufactures, and sales strategies. Each of these aspects of operation has the continual market pressure as well. The cost of production would increase, along with incomes of employees. The resources to produce ethanol and bio-fuels would also increase with the rise in income. Plus government would increase restrictions to regulate cost control and taxations. Overall, because of the steady growth in the use of energy from the U.S., Europe, and increase uses from Asia solidify that a 10% increase of income for customers would generate about 10% increase in demand.
The oil industry today in regard to the automotive market is inelastic in demand. The demand is the same no matter the price due to the need we have on gasoline. The demand for alternative energy, such as ethanol and bio fuels has and will continue to grow. The negative effects of what fossil fuels do the environment and the price of oil causes more people to looking for less costing energy and safer fuels to the environment. Companies such ADM has been given tax incentives so that they can produce more ethanol and bio fuel. These incentives are needed to create a competitive alternative fuel in the energy market. The overall steady growth that we have seen so far in the U.S., Europe and Asia should show that a 10% increase in income would generate a 10% increase in demand.