Question

Use supply and demand diagrams to illustrate the qualitative effect of the following shocks to the Canadian beef market. In each case, explain what happens to the equilibrium price and quantity using words.

(a) A new study shows there are significant health risks associated with consuming too much beef.

(b) Personal income tax rates fall by 50%.

(c) A new plant-based “meatless” burger is introduced onto the market.

(d) An outbreak of BSE (“mad cow disease”) is found in a herd of cows near Lethbridge, Alberta.

Answer 1

Question 1: There will be a fall in the quantity demanded from DD TO DD1 demand curve. This is due to the health risks stated in the question. The equilibrium quantity will fall as will the equilibrium price.

Question 2: There will be a rise in the quantity demanded as the income increases, considering meat is a normal good, the demand curve will shift rightward from DD to DD1, therefore there will be a rise in both equilibrium Quantity and Price .

Question 3: The introduction of a new type of burger provides another option for all the consumers, therefore the demand for meat burgers will fall, while the supply stays the same, therefore equilibrium quantity will fall as will the equilibrium price.

Question 4: the question states that there is a cow disease which means that the overall level of supply will fall, therefore the supply curve will fall from SS to SS 1, the fall in supply will lead to an increase in equilibrium price and a fall in equilibrium quantity.

* Graphs attached below are numbered according to question.