The following three questions relate to this scenario. This scenario is separate from any and all...
The following three questions relate to this scenario. This scenario is separate from any and all previous scenarios. Each of the three questions pertains to the market for CHICKEN. However, the event in question has affected BEEF prices. BEEF prices have risen because severe winter weather has reduced cattle herds. What happens to the market for CHICKEN when BEEF prices rise?
Which curve is affected by higher BEEF prices (scenario four)?
| A. |
The SUPPLY curve for CHICKEN. |
|
| B. |
The DEMAND curve for CHICKEN. |
|
| C. |
NEITHER curve (supply or demand for CHICKEN) is affected by this scenario. |
This the second of three questions relating to this scenario. Assume chicken & beef are substitutes.
What happens to the market for CHICKEN when BEEF prices rise?
What is the effect of higher beef prices on the EQUILIBRIUM PRICE of CHICKEN?
| A. |
Equilibrium price of CHICKEN will DECREASE as a result of this scenario. |
|
| B. |
Equilibrium price of CHICKEN will INCREASE as a result of this scenario. |
|
| C. |
Equilibrium price of CHICKEN will REMAIN THE SAME as a result of this scenario. |
What is the effect of higher beef prices on the EQUILIBRIUM QUANTITY of CHICKEN?
| A. |
Equilibrium QUANTITY of CHICKEN will DECREASE as a result of this scenario. |
|
| B. |
Equilibrium QUANTITY of CHICKEN will INCREASE as a result of this scenario. |
|
| C. |
Equilibrium QUANTITY of CHICKEN will REMAIN THE SAME as a result of this scenario. |
Homework Answers
As Beef and Chicken are substitutes, when Beef prices rise, the consumers will switch to buying chicken instead of Beef, this will lead to a rightward parallel shift of the Demand curve. So in the first question the correct answer is B-The demand curve for chicken.
If the demand curve shifts to the right, and the supply curve remains the same the equilibrium price will increase so the correct answer is option B
If the demand curve shifts to the right, and the supply curve remains the same the equilibrium quantity will increase so the correct answer is option B
Following graph can show these changes:
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