Ethanol or ethyl alcohol is a motor fuel produced from sugarcane, corn or other sugar based feedstocks. In the United States, where ethanol production uses corn as feedstock, the Energy Policy Act requires that a minimum quantity of renewable fuels like ethanol be blended into gasoline. Commentators call this requirement the “corn ethanol mandate”. Currently, there is an increasing political pressure to end the ethanol requirements reflected in four bipartisan proposals that call for an end of the “corn ethanol mandate”. Briefly discuss how the end of the mandate would affect consumer surplus and producer surplus in the market for ethanol, in the market for corn, and in the market for morning cereals.
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