Answer to Question #37089 in Microeconomics for tom

Question

why rising grain prices has lead to the increase in the price of tortillas in mexico

Answer 1

Spurred by the increasing use of corn for ethanol, tortilla prices in Mexico have skyrocketed by more that 50 percent in many regions. Mexicans protested these sharp increases, forcing the government of Felipe Calderon to publicly promise to punish speculators and to call for increased corn imports. Calderon also negotiated a pact with the largest tortilla producers to cap the price of tortillas at 8.5 pesos per kilogram-a 40 percent price increase. However few consumers will benefit from these efforts. Instead, WALMART, the large corporations that dominate the industry, and the U.S. transnational companies that supply Mexico with corn are likely to be the beneficiaries.
As grain is the main component in producing tortillas, the increase in grain prices will cause the increase in tortilla prices, as the cost of producing tortillas increased.